SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
Remington Oil and Gas Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
REMINGTON OIL AND GAS
CORPORATION
Proxy Statement and
Notice of Annual Meeting
Meeting Date May 24, 2004
LETTER TO OUR STOCKHOLDERS
To Our Stockholders:
I cordially invite all of our Stockholders to the Park Cities Hilton in
Dallas, Texas, at 9:00 a.m. on May 24, 2004, for our Annual Meeting. This proxy
statement and proxy card are sent to you in connection with the Annual Meeting.
Also enclosed is a copy of our annual report.
Please vote as soon as possible. We look forward to seeing you at the
Annual Meeting.
Sincerely,
/s/ JAMES A. WATT
James A. Watt
President and Chief Executive
Officer
Chairman of the Board
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS-
MAY 24, 2004
TIME
9:00 a.m. CDT, on Monday, May 24, 2004
PLACE
Park Cities Hilton
5954 Luther Lane
Dallas, Texas
BUSINESS
(1) Elect a Board of Directors of 7 members, and
(2) To consider and vote upon the Remington Oil and Gas Corporation 2004 Stock
Incentive Plan
(3) Transact all other business that may properly come before the meeting.
DOCUMENTS
The Proxy Statement, proxy card, and Remington Oil and Gas Corporation's 2003
Annual Report are included in this mailing.
RECORD DATE
Stockholders owning common stock of the Company at the close of business on
March 31, 2004, are entitled to vote at the Annual Meeting.
VOTING
Even if you plan to attend the meeting in person, please provide us your voting
instructions by marking, signing and dating the proxy card and returning it in
the enclosed postage-paid envelope.
BY ORDER OF THE
BOARD OF DIRECTORS -- March 22, 2004
/S/ J. BURKE ASHER
J. Burke Asher
Secretary
TABLE OF CONTENTS
Questions and Answers....................................... 1
Proposal No. 1.............................................. 3
Corporate Governance -- Our Directors and Officers.......... 3
Corporate Governance -- Board Compensation and Committees... 8
Independent Public Accountants.............................. 10
Audit Committee Report...................................... 12
Executive Compensation...................................... 13
Equity Compensation Plans................................... 14
Pension Plans............................................... 16
Change in Control Arrangements and Employment Contracts..... 18
Board Compensation Committee Report on Executive
Compensation.............................................. 20
Proposal No. 2.............................................. 22
Performance Graph........................................... 32
Security Ownership of Certain Beneficial Owners and
Management -- Ownership of Certain Beneficial Owners...... 33
Security Ownership of Certain Beneficial Owners and
Management -- Ownership of Management..................... 33
Certain Relationships and Related Transactions.............. 35
Audit Committee Charter..................................... A-1
Remington Oil and Gas Corporation 2004 Stock Incentive
Plan...................................................... B-1
(i)
QUESTIONS AND ANSWERS
Q: WHY AM I RECEIVING THIS PROXY STATEMENT AND CARD?
A: The Board of Directors of Remington Oil and Gas Corporation is soliciting
your proxy for the 2004 Annual Meeting of Stockholders and any adjournments or
postponements thereof. The meeting will be held at 9:00 a.m. CDT on Monday, May
24, 2004, at the Park Cities Hilton, Dallas, Texas. This Proxy Statement and
card are initially being provided to stockholders on or about April 20, 2004.
Q: WHAT AM I VOTING ON?
A: The election of seven directors (who will constitute the Company's Board of
Directors) and the adoption of our 2004 Stock Incentive Plan.
Q. WHO IS ENTITLED TO VOTE?
A: Stockholders as of the close of business on March 31, 2004. Each share of
common stock is entitled to one vote. As of March 31, 2004, there were
27,012,801 shares of Remington common stock outstanding.
Q: HOW DO I GIVE VOTING INSTRUCTIONS?
A: You may attend the meeting and vote and give instructions in person or by
mail. Instructions are on the proxy card. The persons named on the proxy card
will vote all properly executed proxies that are delivered pursuant to this
solicitation and not subsequently revoked in accordance with the instructions
given by you.
Q: MAY I CHANGE MY VOTE?
A: Yes, you may revoke your proxy by submitting a subsequent proxy or by written
request received by the Company's secretary before the meeting. The Company's
executive offices are located at 8201 Preston Road, Suite 600, Dallas, Texas
75225-6211. The telephone number is (214) 210-2650.
Q: HOW DO I VOTE IF I HOLD MY STOCK THROUGH A BROKER, BANK OR OTHER NOMINEE?
A: Only stockholders of record as of March 31, 2004, are entitled to vote. If
you hold your shares through a broker, bank, or other nominee, you hold your
shares in "street name." You most likely will receive a request for voting
instructions from the record holder through whom you hold your shares. Follow
the instructions in such a request in order for the record holder to follow your
voting wishes.
Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: You will receive a proxy card for each account that you have. Please vote
proxies for all accounts to ensure that all your shares are voted.
Q: WHAT CONSTITUTES A QUORUM?
A: A majority of the outstanding shares of the Company must be represented at
the meeting, whether in person or by proxy, for there to be a quorum for the
meeting. For purposes of determining the existence of a quorum so that business
may be conducted at the meeting, abstentions are counted as are properly
executed proxies which withhold voting authority on any matter. Abstentions for
purposes of tabulating the vote have the same effect as a vote against Proposal
2, and broker non-votes will have no effect on the outcome of Proposal 2. A
proxy withholding voting authority to vote for a director will not affect the
outcome of the election of directors, since the affirmative vote of a plurality
of shares cast at the meeting is required for election of directors.
Q: WHO PAYS THE EXPENSE OF SOLICITING PROXIES?
A: The Company pays the cost of soliciting proxies. The officers or other
employees of the Company may solicit proxies to have a larger representation at
the meeting.
Q: ARE THERE ANY OTHER MATTERS WHICH MAY BE BROUGHT BEFORE THE MEETING?
A: The Board of Directors knows of no matters to be brought before the meeting
other than the election of directors and consideration of the 2004 Stock
Incentive Plan discussed in this Proxy Statement.
Q: IF THERE ARE MULTIPLE STOCKHOLDERS ASSOCIATED WITH MY ONE ADDRESS, WILL WE
RECEIVE ONLY ONE ANNUAL REPORT?
A: Certain holders of record may forward only one copy of our annual report per
address. If a stockholder desires additional copies, the request can be made by
telephone or in writing to: Corporate Secretary, Remington Oil and Gas
Corporation, 8201 Preston Road, Suite 600, Dallas, Texas 75225-6211, (214)
210-2650. All requests for additional annual reports will be processed promptly.
1
QUESTIONS AND ANSWERS-CONTINUED
Q: DOES THE COMPANY HAVE A NOMINATING COMMITTEE CONSISTING OF ONLY INDEPENDENT
DIRECTORS?
A: Yes. All three members of the Nominating and Corporate Governance Committee
are independent.
Q: HOW IS THE COMPANY'S SLATE OF NOMINEES FOR DIRECTOR DETERMINED?
A: The Nominating and Corporate Governance Committee by a majority vote proposes
a slate of directors to the full Board who must approve the slate by a majority
vote in order for the slate to be presented at the Annual Meeting. Our By-Laws
set forth the process under which stockholders may submit director nominations.
The By-Laws as well as all of our other corporate governance documents are
posted on our Website www.remoil.net.
Q: WHAT IS THE TIMETABLE FOR SUBMITTING STOCKHOLDER PROPOSALS FOR THE 2005
ANNUAL MEETING?
A: Section 2.3 of our By-Laws sets forth the procedures for stockholder
submission of director nominees and proposals. Under these procedures, and
provided that the 2005 Annual Meeting is neither advanced more than 20 days nor
delayed more than 70 days from the first anniversary of the 2004 Annual Meeting,
the timetable for stockholder submissions will be not earlier than February 23,
2005, and no later than March 15, 2005. If our 2005 Annual Meeting is advanced
more 20 days or delayed more than 70 days from the 2004 meeting anniversary
date, to be timely the shareholder proposal must be delivered no later than the
70th day prior to the meeting date.
Q: HOW MANY INDEPENDENT DIRECTORS ARE THERE ON REMINGTON'S BOARD OF DIRECTORS?
A: At present our Board consists of seven members. Five members are independent
and two members are officers of the Company. All of the current directors are
standing for re-election and if all are re-elected, these seven directors will
constitute the entire board.
Q: WHAT BOARD COMMITTEES ARE THERE AND HOW ARE THEIR MEMBERS AND CHAIRMEN
SELECTED?
A: There are currently four standing committees of the Board: Audit,
Compensation, Nominating and Corporate Governance, and Executive. The members of
these committees and their chairmen are selected by a vote of the Board. All
members of the Audit, Nominating and Corporate Governance, and Compensation
committees must be independent directors.
Q: DO YOU INTEND TO INCREASE THE SIZE OF THE BOARD OF DIRECTORS?
A: Under our By-Laws, the Board may fill vacancies on the Board, or the
Nominating and Corporate Governance Committee can propose a slate of directors
that results in an increase in the size of the Board. Board size is an issue to
be studied as the Board considers appropriate.
Q: HOW DO I CORRESPOND WITH THE LEAD NON-MANAGEMENT DIRECTOR?
A: David E. Preng is the current Lead Non-Management Director. Mr Preng's
address is: 2925 Briarpark, Suite 1111, Houston, Texas 77042.
2
PROPOSAL NO. 1
ELECTION OF A SLATE OF SEVEN DIRECTORS
- The Nominating and Corporate Governance Committee and the full Board
unanimously nominated the following for election as directors:
- John E. Goble, Jr. (age 57, director since 1997)
- William E. Greenwood (age 65, director since 1997)
- Robert P. Murphy (age 45, director since 2003)
- David E. Preng (age 57, director since 1997)
- Thomas W. Rollins (age 72, director since 1996)
- Alan C. Shapiro (age 58, director since 1994)
- James A. Watt (age 54, director since 1997)
- The nominees if elected will constitute the entire Board of Directors, and
each has consented to serve until the Annual Meeting in the year 2005.
- The Nominating and Corporate Governance Committee Charter, our Corporate
Governance Guidelines which contain the qualifications for directors, as well
as all of our other corporate governance documents are available on our
website, www.remoil.net.
- The affirmative vote of a plurality of shares present and entitled to vote is
required for the election of directors.
- The Board of Directors recommends a vote "For" the nominees listed in Proposal
No. 1.
CORPORATE GOVERNANCE-
OUR DIRECTORS AND OFFICERS
The following information relates to the members of our Board of Directors or
executive officers during 2003. Each current director holds office until the
2004 Annual Meeting or until his earlier resignation or removal. Each director
re-elected at the 2004 Annual Meeting shall serve until the 2005 Annual Meeting
or his earlier resignation or removal. Executive officers hold their respective
offices at the pleasure of the Board of Directors.
CURRENT DIRECTORS ALL OF WHOM ARE STANDING FOR RE-ELECTION
JOHN E. GOBLE, JR., CPA Age: 57
Positions with us:
- Director since April 1997
- Member -- Audit Committee (Chairman)
- Member -- Compensation Committee
Employment:
- Byrd Investments -- Investment and financial advisor since 1986
Outside directorships:
- Miracle of Pentecost Foundation
Education:
- Bachelor of Business Administration -- Southern Methodist University
WILLIAM E. GREENWOOD Age: 65
Positions with us:
- Director since April 1997
- Member -- Audit Committee
- Member -- Nominating and Corporate Governance Committee
3
CORPORATE GOVERNANCE-
OUR DIRECTORS AND OFFICERS - CONTINUED
Employment:
- Consultant since 1995
- Director and Chief Operating Officer -- Burlington Northern Railroad
Corporation from 1990 until 1994
Outside directorships:
- Transport Dynamics Inc. (Chairman)
- President -- Mendota Museum and Historical Society
Education:
- Bachelor of Science -- Marquette University
ROBERT P. MURPHY Age: 45
Positions with us:
- Chief Operating Officer since October 2000 and Senior Vice
President/Exploration & Production since July 1999
- Vice President/Exploration, January 1998-June 1999
- Director since May 2003
Previous employment:
- Director -- Cairn Energy USA, Inc., May 1996-November 1997
- Vice President -- Exploration -- Cairn Energy USA, March 1993-January 1998
- Exploration Geologist -- Cairn Energy USA, 1990-March 1993
Education:
- Bachelor of Science in Geology -- The University of Texas at Austin
- Master of Science in Geosciences -- The University of Texas at Dallas
DAVID E. PRENG Age: 57
Positions with us:
- Director since April 1997
- Lead Non-Management Director
- Member -- Nominating and Corporate Governance Committee (Chairman)
- Member -- Compensation Committee
- Member -- Executive Committee
Employment:
- Chief Executive Officer and President since 1980 -- Preng and Associates, an
international executive search firm specializing in the energy industry
Outside directorships:
- Director -- Community National Bank
- Director -- National Association of Corporate Directors, Houston Chapter
- Director -- Texas A&M University International Board
- Fellow -- Institute of Directors
Education:
- Bachelor of Science in Business Administration -- Marquette University
- Master of Business Administration -- DePaul University
4
CORPORATE GOVERNANCE-
OUR DIRECTORS AND OFFICERS - CONTINUED
THOMAS W. ROLLINS Age: 72
Positions with us:
- Director since July 1996
- Member -- Nominating and Corporate Governance Committee
- Member -- Executive Committee (Chairman)
Employment:
- Chief Executive Officer since 1985 -- Rollins Resources, a natural gas and oil
consulting firm
- Previously held executive positions and/or directorships with Shell Oil
Company, Pennzoil Company, Florida Gas Transmission Company, Pogo Producing
Company, Magma Copper Company and Felmont Oil Corporation.
Outside directorships:
- Director -- Galaxy Energy Corporation, a publicly traded oil and gas
exploration and production company currently with properties in Wyoming,
Northeast Texas, Montana and Europe
- Director -- Pheasant Ridge Winery
- Director -- The Teaching Company
- Director -- Nature Conservancy of Texas
Education:
- Geological Engineering Degree and Distinguished Graduate Medalist -- The
Colorado School of Mines
ALAN C. SHAPIRO Age: 58
Positions with us:
- Director since May 1994
- Member -- Compensation Committee (Chairman)
- Member -- Audit Committee
Employment:
- The Ivadelle and Theodore Johnson Professor of Banking and Finance in the
Department of Finance and Business Economics, Marshall School of Business,
University of Southern California, since 1992
- Chairman of the Department of Finance and Business Economics, University of
Southern California, 1993-1998
- Frequent consultant and expert witness to business and government
Publications:
- Multinational Financial Management, a best selling textbook used in MBA
programs worldwide
- Numerous other books and articles
Education:
- Bachelor of Arts in Mathematics -- Rice University
- Ph.D. in Economics -- Carnegie Mellon University
JAMES A. WATT Age: 54
Positions with us:
- Chief Executive Officer since February 1998
- President since March 1997
- Chairman since May 2003
- Director since September 1997
- Member -- Executive Committee
5
CORPORATE GOVERNANCE-
OUR DIRECTORS AND OFFICERS - CONTINUED
Positions with our affiliates:
- CKB Petroleum, Inc.
-- Director and President since January 1999
- CKB & Associates, Inc.
-- Director and President since January 1999
Previous employment highlights:
- Vice President/Exploration -- Seagull E&P, Inc., 1993-1997
- Vice President/Exploration and Exploitation -- Nerco Oil & Gas, Inc.,
1991-1993
Outside directorships:
- Director -- Suzuki Institute of Dallas
Education:
- Bachelor of Science in Physics -- Rensselaer Polytechnic Institute
EXECUTIVE OFFICERS NOT ALSO SERVING AS DIRECTORS
STEVEN J. CRAIG Age: 52
Positions with us:
- Senior Vice President/Planning and Administration since April 1997
Positions with our affiliates:
- CKB Petroleum, Inc.
-- Director and Vice President since January 1999
- CKB & Associates, Inc.
-- Director and Vice President since January 1999
Education:
- Bachelor of Arts in Economics -- Southern Methodist University
- Master of Business Administration in Finance and Quantitative
Analysis -- Southern Methodist University
J. BURKE ASHER Age: 63
Positions with us:
- Vice President/Finance since December 1997
- Secretary since October 1996
Positions with our affiliates:
- CKB Petroleum, Inc.
-- Treasurer and Assistant Secretary since March 1997
- CKB & Associates, Inc.
-- Treasurer and Assistant Secretary since March 1997
Education:
- Bachelor of Science in Economics -- The Wharton School of the University of
Pennsylvania
6
CORPORATE GOVERNANCE-
OUR DIRECTORS AND OFFICERS - CONTINUED
GREGORY B. COX Age: 50
Positions with us:
- Vice President/Exploration since January 2002
- Exploration Manager from October 1997 to December 2001
Education:
- Bachelor of Science in Geology -- University of Texas at Arlington
EDWARD V. HOWARD, CPA Age: 40
Positions with us:
- Vice President/Controller since March 1992
- Assistant Secretary since October 1997
Education:
- Bachelor of Business Administration -- West Texas State University
Except for Mr. Rollins' position as a director of Galaxy Energy Corporation and
his consulting practice, no director has a significant personal interest in the
exploration, development or production of oil and gas. Mr. Rollins is required
to abstain on matters in which there may be a conflict of interest between us
and Galaxy or one of his clients. We believe that Galaxy has no current
activities in our areas of interest.
We have adopted a code of ethics (our "Code of Business Conduct and Ethics"
previously filed with the Commission and accessible on our website) that applies
to all directors and employees including our Chief Executive Officer, Principal
Financial Officer, and Principal Accounting Officer.
LITIGATION INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
We know of no reportable litigation involving the directors or executive
officers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon our review of Forms 3, 4, and 5 received by us for 2003, all
persons required by Section 16(a) of the Securities Exchange Act of 1934 ("the
Act") to file such forms complied with Section 16(a) of the Act.
7
CORPORATE GOVERNANCE-
BOARD COMPENSATION AND COMMITTEES
COMPENSATION OF DIRECTORS
- Only non-employee directors are compensated for Board service
- Compensation includes:
-- Annual retainer of $20,000
-- $1,000 per Board meeting attended
-- Committee meeting fee of $750 per meeting attended by committee members or
$1,000 for the committee chairman per meeting attended, if on a different
day than a full Board meeting
-- Eligible for awards of Stock Options
-- Eligible for stock grant (see discussion of Contingent Stock Grants under
Equity Compensation Plans)
-- Directors are entitled to reimbursement of Company related out-of-pocket
expenses
-- We provide directors and officers insurance and indemnification to the full
extent allowed by law
-- All or part of a director's Board compensation may be received in Company
stock in accordance with the Non-Employee Director Stock Purchase Plan
- There were six Board meetings in 2003
- All directors attended at least 75% of the meetings and each director is
expected to attend our annual meeting
- In 2003 current non-employee directors each were awarded 10,000 non-qualified
stock options with exercise prices of $18.81, exercisable one year after the
date of grant.
- In 2003 each non-employee director (except David H. Hawk) became vested in
4,776 shares of the 23,880 restricted shares of our common stock that they had
been granted on January 24, 2001, under the Contingent Stock Grants discussed
in the Equity Compensation Plans section of this Proxy Statement. As of
December 31, 2003, each non-employee director held 14,328 unvested shares with
a market value of $282,118. These unvested shares will not actually be issued
until the vesting period has been fulfilled by the director. The value of the
unvested stock as of December 31, 2003, is based on the closing price of our
common stock on that date, which was $19.69 per share. Dividends, if any, paid
by us will not be paid on the unvested shares.
NON-EMPLOYEE DIRECTOR STOCK PURCHASE PLAN
- This plan was approved by our stockholders December 4, 1997
- Each non-employee director may, once a year, elect to receive all or part of
his Board compensation in our common stock
- The number of shares received equals 150% of the cash amount of compensation
divided by the closing market price of our common stock on the day the cash
fees would be payable
- Shares received under this plan may not be transferred for one year after
issuance
- Shares may be transferred earlier than one year in the case of a director's
death, disability or departure from the Board
- During the restricted transfer period the director may vote the stock and
receive any dividends
- The Board may terminate this plan at any time
- Shares received under plan for 2003:
-- John E. Goble, Jr........ 983 shares in lieu of $12,000 cash
-- William E. Greenwood..... 3,297 shares in lieu of $40,250 cash
-- David H. Hawk............ 665 shares in lieu of $8,000 cash
-- James Arthur Lyle........ 1,105 shares in lieu of $13,000 cash
-- David E. Preng........... 3,513 shares in lieu of $43,000 cash
-- Thomas W. Rollins........ 656 shares in lieu of $8,000 cash
-- Alan C. Shapiro.......... 2,903 shares in lieu of $35,500 cash.
- BOARD COMMITTEES
- Audit Committee:
- Members are Mr. Goble, Mr. Greenwood, and Dr. Shapiro
- Met five times in 2003
- The Audit Committee and its functions are governed by an Audit Committee
Charter adopted by our Board of Directors. At its meeting on April 2, 2004,
the Board of Directors amended the Audit Committee Charter to
8
CORPORATE GOVERNANCE-
BOARD COMPENSATION AND COMMITTEES - CONTINUED
provide for greater specificity relating to employee accounting complaints as
well as to provide the Audit Committee Chairman the authority to approve a
limited amount of accounting fees subject to ratification by a majority of the
Audit Committee acting as a whole. The Audit Committee Charter, as amended, is
attached to this Proxy Statement as Appendix A. The Audit Committee Report is
included on page 12 in this Proxy Statement
- Compensation Committee:
- Members are Dr. Shapiro, Mr. Preng, and Mr. Goble
- Met twice in 2003
- Evaluates performance of executive officers and approves their compensation
- Approves compensation for other employees
- Administers the Company's long-term incentive compensation plans
- Oversight responsibility for Company's pension and 401(k) plans
- The Nominating and Corporate Governance Committee:
- Met twice in 2003
- Members are Mr. Preng, Mr. Greenwood, and Mr. Rollins
- The Nominating and Corporate Governance Committee's primary purposes are to
identify individuals qualified to become members of the Board of Directors,
and to recommend a slate of directors to the Board of Directors for election
at the Company's annual meeting or, if requested by the Board of Directors,
recommend director candidates to fill a vacancy on the Board; to assist in the
development of the Company's Corporate Governance Guidelines and the Company's
Code of Business Conduct and Ethics
- Executive Committee:
- Members are Mr. Preng, Mr. Rollins, and Mr. Watt
- Met twice in 2003
- Has authority to perform in place of the Board of Directors except for matters
relating to amending the Certificate of Incorporation, declaring dividends,
adopting a merger agreement, recommending to the stockholders a sale or
dissolution of the Company, removing or indemnifying directors, and amending
the By-Laws
- Non-employee Directors:
Apart from their meetings in connection with scheduled Board of Directors
meetings, the five non-employee directors (all of whom are independent
directors) met three times in 2003. Two of the meetings excluded company
executives. The meetings were held to attend a continuing education program
and to discuss outside of the presence of company executive officers the
direction of the company and board evaluations. The third meeting was to visit
and observe one of our offshore facilities.
From time to time, other committees of the Board of Directors may be established
for special purposes.
9
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of our Board of Directors has selected Ernst & Young LLP as
our principal independent public accountants. Ernst & Young performed our audits
for the fiscal years ended December 31, 2002 and 2003. A representative of Ernst
& Young is expected to be present at our Annual Meeting. The representative will
have the opportunity to make a statement if so desired, and will be available to
respond to appropriate questions.
On April 17, 2002, our Board of Directors, based on the recommendation of our
Audit Committee, dismissed Arthur Andersen as our principal independent public
accountants and selected Ernst & Young. Arthur Andersen had been our principal
independent public accountants since 1996. There had been no disagreements with
Arthur Andersen on any matter of accounting principles or practices, financial
statement disclosure or auditing scopes or procedures during that period. Our
principal independent public accountants' report on the financial statements for
either of the past two years has not contained an adverse opinion or a
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope, or accounting principles. During our two most recent fiscal years
prior to the engagement of Ernst & Young, we did not consult Ernst & Young with
respect to the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on our consolidated financial statements, or any other matters or
reportable events listed in Items 304(a)(2)(i) and (ii) of Regulation S-K.
In addition to retaining Ernst & Young to audit our financial statements for
2003, we retained Ernst & Young, as well as other accounting firms to provide
tax and other advisory related services in 2003. Because we recognize the
importance of Ernst & Young maintaining objectivity in their audits, Ernst &
Young will not be engaged to perform any accounting, tax, or advisory work which
they will be placed in judgment of as part of their audit of our financial
statements. In addition, the Audit Committee must approve any engagement of
Ernst & Young apart from their engagement as our auditors.
As discussed earlier in this proxy statement, our Board of Directors has amended
the Audit Committee Charter to allow the Chairman of the Audit Committee to
approve up to $50,000 in fees with Ernst & Young over and above the amount
authorized in our primary engagement letter with Ernst & Young. Any
authorization by the Audit Committee Chairman of such additional fees is subject
to ratification by at least a majority of the Audit Committee acting as a whole.
Further, the Audit Committee has approved the engagement of Ernst & Young up to
a fee limit of $10,000 for the undertaking of a tax study in event our
management should wish to so engage Ernst & Young for such a study. Other than
as discussed above, we have no pre-approved arrangements with Ernst & Young. The
Audit Committee approved all of the services relating to the fees shown below.
FEES
For the fiscal years ended December 31, 2003, and December 31, 2002, we incurred
the following charges from Ernst & Young in connection with their services:
TYPE OF FEES 2003 2002
------------------------------------------------------------ -------- --------
Audit Fees.................................................. $196,470 $170,000
Audit Related Fees.......................................... 0 0
Tax Fees.................................................... 92,504 0
All Other Fees.............................................. 0 4,800
-------- --------
Total..................................................... $288,974 $174,800
In the above table, in accordance with the SEC's definitions and rules, "audit
fees" are fees we paid Ernst & Young for professional services for the audit of
our consolidated financial statements included in Form 10-K and review of
financial statements included in Form 10-Q, and for services that are normally
provided by the accountant in connection with regulatory filings or engagements
including comfort letters,
10
INDEPENDENT PUBLIC ACCOUNTANTS - CONTINUED
consents, and assistance with review of documents filed with the Commission;
"audit-related fees" are fees for assurance and related services that are
reasonably related to the performance of the audit or review of our financial
statements; "tax fees" are fees for tax compliance, tax advice and tax planning;
and "all other fees" are fees for preparation of compliance reports for our
retirement plans.
11
AUDIT COMMITTEE REPORT
The Audit Committee, consisting solely of independent directors, submits the
following report:
The Audit Committee of our Board of Directors consists of the three directors
named below. Each member of the committee is an independent director and
financially literate, as defined in the New York Stock Exchange listing
standards. In addition, our Board of Directors has determined that all three
members are independent and that John E. Goble, Jr. is an Audit Committee
Financial Expert as defined by Securities and Exchange Commission rules. Our
Audit Committee Charter, as recently amended, which contains among other things
the Audit Committee's key practices, is set forth in full as Appendix A to this
Proxy Statement.
During 2003 the Committee met five times.
On April 17, 2002, the Company dismissed Arthur Andersen as its independent
public accountants and engaged Ernst & Young LLP to serve as the Company's
independent public accountants for fiscal year 2002 (see the Company's Current
Report on Form 8-K filed with the Securities and Exchange Commission on April
24, 2002).
In discharging its oversight responsibility as to the audit process, the
Committee obtained from Ernst & Young a formal written statement describing all
relationships between Ernst & Young and the Company that might bear on Ernst &
Young's independence consistent with Independence Standards Board Standard No.
1, "Independence Discussions with Audit Committees;" discussed with Ernst &
Young any relationships that may affect their objectivity and independence,
including the compatibility of non-audit services with Ernst & Young's
independence; and satisfied itself as to Ernst & Young's independence. The
Committee also discussed with management and Ernst & Young the quality and
adequacy of the Company's internal controls.
The Committee discussed and reviewed with Ernst & Young all communications
required by generally accepted auditing standards, including those described in
Statement on Auditing Standards No. 61, as amended, "Communication with Audit
Committees," and discussed and reviewed the results of Ernst & Young's
examination of the financial statements, including quarterly unaudited financial
statements.
The Committee reviewed the audited financial statements of the Company for the
year ended December 31, 2003, with management and Ernst & Young.
Based on the above-mentioned review and discussions with management and Ernst &
Young, the Committee recommended to the Board that the Company's audited
financial statements be included in its Annual Report on Form 10-K for the year
ended December 31, 2003, for filing with the Securities and Exchange Commission.
John E. Goble, Jr. -- Chairman
William E. Greenwood
Alan C. Shapiro
12
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by the Company during 2003,
2002, and 2001 to the Company's Chief Executive Officer and its four most highly
compensated executive officers, other than the Chief Executive Officer, whose
total annual salary and bonus in 2003 exceeded $100,000.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION SECURITIES
------------------------------- RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION AWARDS SAR'S COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#) ($)(4)
------------------ ------ ------- ------- ------------ ---------- ---------- ------------
James A. Watt.................... 2003 400,008 358,000 -- -- 35,000 1,242
Chief Executive 2002 360,000 252,000 -- --(2) 35,000 1,242
Officer and President 2001 320,004 405,000 -- 768,351(3) 35,000 1,242
Robert P. Murphy................. 2003 290,004 300,000 -- -- 30,000 540
Chief Operating Officer and 2002 275,004 159,000 -- -- 32,000 540
Senior Vice President/ 2001 225,000 200,000 -- 517,164(3) 25,000 480
Exploration and Production
Gregory B. Cox................... 2003 174,000 105,000 -- -- 18,000 822
Vice President/ 2002 167,004 57,000 -- -- 20,000 511
Exploration 2001 147,000 45,000 -- 372,351(3) 15,000 439
Steven J. Craig.................. 2003 171,000 70,000 -- -- 12,000 806
Senior Vice President/ 2002 165,000 41,000 -- -- 18,000 773
Planning and Administration 2001 125,808 46,000 -- 338,964(3) 12,000 364
J. Burke Asher................... 2003 155,004 65,000 -- -- 11,000 2,059
Vice President/Finance 2002 150,000 37,000 -- -- 17,500 1,980
and Secretary 2001 119,600 44,000 -- 322,703(3) 11,500 1,505
---------------
(1) No amount is included, as it is less than the lower of $50,000 or 10% of the
total salary and bonus of the individual for the year.
(2) Effective March 17, 1997, in connection with his initial employment
agreement, Mr. Watt was awarded 15,000 restricted shares of common stock,
which vested and became unrestricted 20% per year from the effective date.
(3) On January 24, 2001, contingent grants of common stock became effective as
follows: Mr. Watt 62,089 shares; Mr. Murphy 41,791 shares; Mr. Cox 30,089
shares; Mr. Craig 27,391 shares; and Mr. Asher 26,077 shares. The closing
price of our common stock on that date was $12.375 per share. For Mr. Cox,
the shares vest 50% on June 17, 2002, and 25% each on June 17, 2003 and
2004. For the other officers listed above, the shares vest 20% annually
beginning January 17, 2002. Except in the event of death, long-term
disability, or change of control, the officers will forfeit unvested shares
if their employment with us terminates prior to the vesting dates. As of
December 31, 2003, Mr. Watt held 37,254 shares of unvested stock with an
aggregate market value of $733,531; Mr. Murphy held 25,075 shares of
unvested stock with an aggregate market value of $493,727; Mr. Cox held
7,523 shares of unvested stock with an aggregate market value of $148,128;
Mr. Craig held 16,435 shares of unvested stock with an aggregate market
value of $323,605; and Mr. Asher held 15,647 shares of unvested stock with
an aggregate market value of $308,089. These unvested shares will not
actually be issued until the vesting period has been fulfilled by the
officer. The value of the unvested stock as of December 31, 2003, is based
on the closing price of our common stock on that date, which was $19.69 per
share. Dividends, if any, paid by us will not be paid on the unvested
shares.
(4) These amounts are for group term life insurance premiums paid by the
Company.
See "Change in Control Arrangements and Employment Contracts" below.
13
EQUITY COMPENSATION PLANS
STOCK OPTION PLANS
We have stock option plans for our employees and directors because we believe
these options act as both an incentive and a reward for the long-term growth of
our Company. The core of our stock option program has been the 1997 stock option
plan. Both directors and employees are eligible for options under this plan.
However, options for fewer than 50,000 shares remain ungranted under this plan.
We do not anticipate further grants under this plan if the 2004 Stock Incentive
Plan is approved by our stockholders. Significant attributes of the 1997 plan
include the following:
- Approved by the stockholders
- Administered by the Compensation Committee of our Board of Directors
- Subject to adjustments, up to 3,750,000 shares of our common stock may be
issued under the plan
- Up to 25% of issuable shares may be issued to any single individual
- Both qualified incentive and non-qualified options may be issued
- No options may be granted after December 4, 2007
The importance of whether an option is granted as a qualified incentive option
or a non-qualified option is mainly tax driven. If an option is an incentive
option, the exercise price can be no less than the fair market value on the date
of grant. Additional details concerning the 1997 stock option plan are contained
in the plan itself. For a copy of the plan, call Investor Relations at (214)
210-2650.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR $/SHARE DATE VALUE $(1)
---- ---------- ------------- -------- ---------- ----------
James A. Watt.......................... 35,000 12% 18.81 12/15/13 435,361
Robert P. Murphy....................... 30,000 10% 18.81 12/15/13 373,167
Gregory B. Cox......................... 18,000 6% 18.81 12/15/13 223,900
Steven J. Craig........................ 12,000 4% 18.81 12/15/13 149,267
J. Burke Asher......................... 11,000 4% 18.81 12/15/13 136,828
---------------
(1) We determined these values using the Black-Scholes option pricing model with
the following assumptions: stock price volatility of 65.19%; interest rate
based on the yield to maturity of a 7-year Treasury security; exercise in
the tenth year; and a dividend rate of zero. We made no adjustments for
nontransferability or risk of forfeiture. Our use of this model does not
constitute an endorsement or an acknowledgment that such model can
accurately determine the value of options. No assurance can be given that
the actual value, if any, realized by an executive upon the exercise of
these options will approximate the estimated values calculated by using the
Black-Scholes model.
14
EQUITY COMPENSATION PLANS - CONTINUED
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES VALUE OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END ($)(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- --------- ----------- ------------- ----------- -------------
James A. Watt............... 137,638 1,853,567 253,514 70,000 3,484,948 141,051
Robert P. Murphy............ 37,504 560,883 138,237 59,667 1,772,734 117,005
Gregory B. Cox.............. 48,546 684,752 51,787 36,333 571,457 71,556
Steven J. Craig............. 22,564 301,138 24,033 28,000 244,454 58,520
J. Burke Asher.............. -- -- 76,500 26,499 957,194 56,062
---------------
(1) Computed as the number of securities multiplied by the difference between
the option exercise price and the mean of the high and low price of our
common stock on the date of exercise.
(2) Computed as the number of securities multiplied by the difference between
the option exercise prices and the closing price of our common stock on
December 31, 2003.
CONTINGENT STOCK GRANTS
In 1999, the Board of Directors approved contingent awards of stock to employees
and directors totaling 679,937 shares of our common stock. The number of shares
awarded to each employee and director was based on the employee's annual base
salary as of June 17, 1999, or in the case of non-employee directors, $100,000,
divided by $4.19, which was the closing stock price on June 17, 1999. In order
for the grant to become effective, our stock had to close above a trigger price
of $10.42 for 20 consecutive trading days within 5 years of the grant date. This
trigger was achieved on January 24, 2001. Recipients of the grant must remain an
employee or a director during the vesting schedules in order to receive the
shares. Employees and directors individually elected one of two vesting periods.
The first vesting schedule has 50% percent of the grant vesting on June 17,
2002, with an additional 25% vesting on June 17, 2003, and the final 25% vesting
on June 17, 2004. 264,863 shares are subject to this vesting schedule. The
second vesting option has 20% of the grant vesting on January 17, 2002, with an
additional 20% vesting on each successive January 17 through 2006. 380,762
shares are subject to the second vesting schedule. While 679,937 shares of
restricted stock were granted in 1999, as of April 2, 2004, 645,625 shares are
subject to the grant because a director voluntarily surrendered 23,880 shares, a
new employee was granted 6,535 shares, and employee and director terminations
resulted in the forfeiting of 16,967 shares. The number of shares subject to the
grant may decrease to the degree that participants fail to remain with us during
the vesting period. In the event of a participant's death while employed or
serving as a director with us, or an employee reaching the retirement age of 65
or receiving long term disability benefits while employed with us, a grant
becomes 100% vested. In addition, the grants can become 100% vested upon a
change of control.
15
PENSION PLANS
Our defined benefit pension plans provide retirement and other benefits to
eligible employees upon reaching the "normal retirement age," which is age 65 or
after 3 years of service (5 years if employment terminated prior to January 1,
2001), if later. Directors who are not also employees of the Company are not
eligible to participate in the plans. Employees are eligible to participate on
January 1 following the completion of six months of service or the attainment of
age 20 1/2, if later. Additional provisions are made for early or late
retirement, disability retirement and benefits to surviving beneficiaries. At
normal retirement age, an eligible employee will receive a monthly retirement
income equal to 35% of his or her average monthly compensation during the three
consecutive calendar years in the prior 10 years which provide the highest
average compensation, plus 0.65% of such average compensation in excess of the
amount shown in the Social Security Covered Compensation Table (as published
annually by the Internal Revenue Service) multiplied by his or her years of
service, limited to 35 years. If an employee terminates employment (other than
by death or disability) before completion of three years of service (five years
if employment terminated prior to January 1, 2001), no benefits are payable. If
an employee terminates employment after three years of service (five years if
employment terminated prior to January 1, 2001), the employee is entitled to all
pro rata accrued benefits. The following table illustrates the annual pension
for plan participants that retire at "normal retirement age" in 2003:
PENSION PLAN TABLE
YEARS OF SERVICE(1)(3)(4)
AVERAGE --------------------------------------------
COMPENSATION(1)(2) 15 20 25 30 35
------------------ ------ ------ ------ ------- -------
($) ($) ($) ($) ($) ($)
125,000................................. 51,667 54,306 56,945 59,584 62,223
150,000................................. 62,855 66,306 69,758 73,209 76,661
175,000................................. 74,042 78,306 82,570 86,834 91,098
200,000................................. 85,230 90,306 95,383 100,459 105,536
225,000................................. 85,230 90,306 95,383 100,459 105,536
250,000................................. 85,230 90,306 95,383 100,459 105,536
300,000................................. 85,230 90,306 95,383 100,459 105,536
400,000................................. 85,230 90,306 95,383 100,459 105,536
450,000................................. 85,230 90,306 95,383 100,459 105,536
500,000................................. 85,230 90,306 95,383 100,459 105,536
---------------
(1) As of December 31, 2003, the Internal Revenue Code does not allow qualified
plan compensation to exceed $200,000 or the benefit payable annually to
exceed $160,000. The Internal Revenue Service will adjust these limitations
for inflation in future years. When the limitations are raised, the
compensation considered and the benefits payable under the pension plans
will increase to the level of the new limitations or the amount otherwise
payable under the pension plans, whichever amount is lower.
(2) Subject to the above limitations, compensation in this table is generally
equal to all of a participant's cash compensation paid in a fiscal year (the
total of Salary, Bonus, and Other Annual Compensation in the Summary
Compensation Table). Average compensation in this table is the average of a
plan participant's compensation during the highest three consecutive years
out of the prior 10 years.
16
PENSION PLANS - CONTINUED
(3) The estimated credited service at December 31, 2003, for the executive
officers shown in the Summary Compensation Table is as follows: James A.
Watt (7 years), Robert P. Murphy (6 years), Steven J. Craig (9 years), J.
Burke Asher (7 years), and Gregory B. Cox (6 years).
(4) The normal form of payment is a life annuity for a single participant or a
50% joint and survivor annuity for a married participant. Such benefits are
not subject to a deduction for Social Security or other offset amounts.
17
CHANGE IN CONTROL ARRANGEMENTS AND
EMPLOYMENT CONTRACTS
All of our full-time regular employees are covered by a severance plan that we
adopted in 1997. Under this plan, if an employee is involuntarily terminated, as
that term is defined in the plan, the employee will be entitled to a payment of
between two months base pay and eighteen months base pay depending on the
employee's job and years of service. If an employee voluntarily quits, is
terminated for cause as defined in the plan, dies, leaves due to a disability
for which benefits are payable, or the termination is expected to be of short
duration, the employee is not eligible for payment under the plan. In addition,
under certain circumstances, a change in control could cause immediate vesting
and triggering of stock options and contingent stock grants. As of December 31,
2003, if the contingent stock grants were vested by a change in control, it
would result in the issuance of a maximum aggregate of 259,636 shares to
directors and employees.
Employment Agreements
We have employment agreements with James A. Watt, Robert P. Murphy, Gregory B.
Cox, Steven J. Craig, and J. Burke Asher. The most significant terms of such
agreements are summarized below:
James A. Watt
- Term of three years from January 31, 2000, subject to single year
extensions by mutual agreement
- Base salary of $270,000 a year, subject to discretionary increases
- Eligible to receive discretionary performance bonus (targeted at 70%
of base salary)
- If terminated prior to a change in control, without cause, he receives
his salary plus a pro rata bonus
- He receives 2.99 times the sum of his base salary plus his target
bonus if he is terminated within 24 months of a change in control,
other than for death, disability or cause, or if he leaves for good
reason within the 24 month period
Robert P. Murphy
- Term of three years from September 30, 1999, subject to single year
extensions by mutual agreement
- Base salary of $175,000 a year, subject to discretionary increases
- Eligible to receive discretionary performance bonus (targeted at 50%
of base salary)
- If terminated prior to a change in control, without cause, he receives
his salary plus a pro rata bonus
- He receives 2.99 times the sum of his base salary plus his target
bonus if he is terminated within twelve months of a change in control,
other than for death, disability or cause, or if he leaves for good
reason within the twelve month period
Gregory B. Cox
- Term of two years from April 30, 2002, subject to one year extensions
by mutual agreement
- Base salary of $167,000, subject to discretionary increases
- Eligible to receive discretionary performance bonus (targeted at 35%
of base salary)
18
CHANGE IN CONTROL ARRANGEMENTS AND
EMPLOYMENT CONTRACTS - CONTINUED
- If terminated prior to a change in control, without cause, he receives
all accrued compensation and a pro rata bonus plus a severance payment
in lieu of further compensation equal to 1 times his current base
salary
- He receives accrued compensation and a pro rata bonus and 2 times the
sum of his base salary plus target bonus if he is terminated within
twelve months of a change in control, other than for death, disability
or cause, or if he leaves for good reason within the twelve month
period
Steven J. Craig and J. Burke Asher
- Term of two years from September 30, 1999, subject to single year
extensions by mutual agreement
- Base salary of $114,200 (Mr. Craig) and $109,200 (Mr. Asher), subject
to discretionary increases
- Eligible to receive discretionary performance bonus (targeted at 20%
of base salary)
- Severance payments similar to Robert Murphy's, except that Mr. Craig
and Mr. Asher each receive 2 times the sum of his annual salary plus
target bonus in connection with leaving employment within twelve
months of a change in control
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Alan C. Shapiro, David E. Preng, and John E. Goble, Jr., served on the
compensation committee in 2003. No executive officer or employee serves on the
compensation committee of the Board. None of our executive officers serves on
the board of directors of any other entity that has an executive officer serving
on our Board.
19
BOARD COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
We believe that employing and retaining highly qualified and high performing
executive officers is vital to our achievement of long-term business goals. To
this end, the Compensation Committee of the Board of Directors (the "Committee")
developed an executive compensation program which is designed to attract,
retain, and incentivize such officers.
The philosophy is to develop a systematic, competitive executive compensation
program which recognizes an executive officer's position and responsibilities,
takes into account competitive compensation levels payable within the industry
by similarly sized companies, and reflects both individual and Company
performance.
The executive compensation program developed by the Committee is composed of the
following three elements: (i) a base salary, (ii) a performance-based annual
cash incentive (short-term), and (iii) a stock-based incentive (long-term).
Under this program, short-term and long-term incentives are "at-risk" and are
based on performance of the Company versus defined goals.
The Committee compiles data reflecting the compensation practices of a broad
range of organizations in the oil and gas industry that are similar to us in
size and performance. For both the base salary and annual cash incentives
portion of executive compensation discussed below, the Committee adopted a
philosophy of paying the executive officers at a level that is competitive and
within the ranges reflected by the data compiled.
BASE SALARIES
Base salary is the portion of an executive officer's total compensation package
that is payable for performing the specific duties and assuming the specific
responsibilities defining the executive's position with the Company. The
Committee's objective is to provide each executive officer a base salary that is
competitive with peers.
ANNUAL CASH INCENTIVES
The Committee developed a performance-based annual cash incentive plan covering
the executive officers and top managers. The objectives in designing the plan
are to reward participants for accomplishing objectives which are generally
measurable and increase shareholder value. Under the annual cash incentive plan,
the Committee has established a "target" cash incentive award for each executive
officer (including the Chief Executive Officer) that is payable based mostly
upon the Company's achieving certain performance targets and, to a lesser
extent, for achieving highly challenging individual performance objectives. The
performance targets are increasing reserves and production; controlling finding
and development costs, lease operating costs, and general and administrative
costs; all of which are competitive with a peer group of oil and gas companies.
The Committee also determined that award levels under the plan should be
fiscally prudent and that total compensation levels should be limited to the
amount deductible (generally $1,000,000 plus certain exclusions) under Section
162(m) of the Internal Revenue Code.
LONG-TERM STOCK-BASED INCENTIVES
We maintain a stock option plan for officers and other employees. The philosophy
is to award stock options to selected plan participants based on their levels
within the Company and upon individual merit. The plan is to grant stock options
which are competitive within the industry for other individuals at the
employee's level and which provide the employee a meaningful incentive to remain
with the Company, to increase performance, and to focus on achieving long-term
increases in shareholder value. Other factors the Committee considers in
granting stock options include the employee's contributions toward achieving
20
BOARD COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION - CONTINUED
the Company's long-term objectives, such as reserve and production growth, as
well as the employee's contributions in achieving the Company's short-term and
long-term profitability targets.
BASIS FOR CHIEF EXECUTIVE OFFICER COMPENSATION
For 2003, we paid Mr. Watt a salary of $400,008. The bonus paid in 2003 was
$358,000, which exceeded the $280,000 target bonus, reflecting the Company's
performance in 2003, which included increasing production by 25% over 2002
levels and increasing reserves by 4% over 2002 levels. Finding and development
costs and overall cash costs were competitive with industry peers.
In December of 2003 we granted Mr. Watt stock options representing 35,000 shares
of our common stock. These options were awarded in this amount based on his
position in the Company and the merit of his performance as discussed above.
COMPENSATION COMMITTEE
Dr. Alan C. Shapiro -- Chairman
John E. Goble
David E. Preng
21
PROPOSAL NO. 2
APPROVAL OF
REMINGTON OIL AND
GAS CORPORATION'S
2004 STOCK
INCENTIVE PLAN
- The affirmative vote of a majority of shares present and entitled to vote is
required for approval.
- The Board of Directors recommends a vote "For" the adoption of the 2004 Stock
Incentive Plan.
The stockholders are being asked to consider and vote on a proposal to adopt the
Remington Oil and Gas Corporation 2004 Stock Incentive Plan, referred to in this
description as the Plan. The Plan was adopted by the Company's Board of
Directors (referred to herein as the "Board"), subject to the approval of the
stockholders. If the stockholders approve the Plan, it will be effective as of
May 24, 2004. A copy of the Plan is attached to this proxy statement as Appendix
B. The description of the Plan contained herein is not intended to be complete
and is qualified by reference to Appendix B, which contains the complete text of
the Plan.
The purposes of the Plan are to (1) promote the Company's interests and the
interests of our stockholders by encouraging the participants to acquire or
increase their equity interest in the Company, thereby giving them an added
incentive to work toward our continued growth and success and (2) enable us to
compete for the services of the individuals needed for our continued growth and
success. To accomplish this purpose, the Plan provides for the grant to eligible
persons of stock options, purchased stock, bonus stock, phantom stock, stock
appreciation rights, restricted stock, performance awards, and other stock or
performance-based awards consistent with the purposes of the Plan.
AVAILABLE SHARES
The maximum number of shares of common stock that may be issued under the Plan
is equal to 2,000,000 shares, subject to adjustment in the event of stock splits
and certain other corporate events. In addition, during any one calendar year,
the number of shares of common stock that may be issued or reserved for issuance
as options to any one participant plus the number of such shares underlying
stock appreciation rights that may be granted to that same participant shall not
exceed 250,000 shares. To the extent shares cease to be issuable under an award
made under the Plan, they will be available under the Plan for the grant of
additional awards unless such shares cease to be subject to an award because of
the exercise of the award or the vesting of a restricted stock award or similar
award. Shares issued under the Plan may be authorized and unissued common stock,
common stock held in or acquired in Company treasury or, if applicable, shares
acquired in the open market. The closing market price per share of the common
stock on the New York Stock Exchange as of April 2, 2004, was $19.79.
PERSONS ELIGIBLE TO PARTICIPATE
Except with respect to awards of incentive stock options, all employees and
non-employee directors of the Company or its affiliates are eligible to
participate in the Plan. The term "non-employee director" means any member of
the board of directors who is not an employee of the Company, including any
director emeritus. Incentive stock options may be awarded only to employees. In
selecting employees and non-employee directors to receive awards, including the
type and size of the award, the compensation committee of the Board (the
"Committee") may consider any factors that it deems relevant. As of the date of
this Proxy Statement, approximately 34 employees and 6 non-employee directors (5
elected directors and 1 director emeritus) are eligible to participate in the
Plan.
ADMINISTRATION
The Plan will be administered by the Committee, which currently consists of
three independent non-employee directors appointed by the Board. The Committee
must consist of two or more "non-employee directors" as defined in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, as then in
effect, and also an "outside director" within the meaning of Sec-
22
PROPOSAL NO. 2
APPROVAL OF REMINGTON OIL AND GAS
CORPORATION'S 2004 STOCK INCENTIVE PLAN -- CONTINUED
tion 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and
the rules and regulations thereunder. Our corporate governance documents
currently require that the Committee be composed of three independent directors.
All awards and any amendments thereto are subject to approval by the full Board
and also subject to the provisions of the Plan. The Committee will (i) interpret
the Plan and all awards under the Plan, (ii) make rules as it deems necessary
for the proper administration of the Plan, (iii) make all other determinations
necessary or advisable for the administration of the Plan and (iv) correct any
defect or supply any omission or reconcile any inconsistency in the Plan or in
any award under the Plan in the manner and to the extent that it deems desirable
to effectuate the Plan. Any action taken or determination made by the Committee
and approved by the Board pursuant to the Plan will be binding on all parties.
No member of the Board or the Committee will be liable for any action or
determination made in good faith with respect to the Plan or an award granted
thereunder.
TYPES OF AWARDS
The Plan provides for the grant of any or all of the following types of awards:
(i) stock options, including incentive stock options and non-qualified stock
options; (ii) purchased stock; (iii) bonus stock; (iv) stock appreciation
rights, either in tandem with stock options or freestanding; (v) phantom stock;
(vi) restricted stock awards; (vii) performance awards; and (viii) other stock
or performance-based awards. All awards will be evidenced by a written agreement
and the terms, conditions and/or restrictions contained in an award may differ
from the terms, conditions and/or restrictions contained in any other award.
Each type of award is discussed in more detail below.
Stock Options. Subject to approval by the Board and the terms of the Plan, the
Committee has the authority to grant options, in such form as the Committee may
from time to time approve. Subject to approval by the Board, the Committee also
has the authority to determine whether options granted to employees will be
incentive stock options or non-qualified options.
Except as described below, no option may be exercised later than the date which
is ten years after the date of grant. The exercise price at which shares of
common stock may be purchased upon the exercise of an option shall not be less
than the fair market value. The fair market value of each share of common stock
delivered will be deemed to be equal to the closing price on the New York Stock
Exchange or other exchange or over-the-counter market on which such shares are
trading for the date of the determination, or if no trade of the common stock
has been reported for such date, the average of the high and low sales prices
quoted on such exchange or the average of the closing bid and asked prices
quoted on the market for the most recent trade prior to the determination date.
In the case of incentive stock options granted to employees owning more than ten
percent (10%) of the total combined voting power of the Company and its
affiliates, then the exercise price at which shares of common stock may be
purchased upon the exercise of such incentive option shall be equal to one
hundred ten percent (110%) of the fair market value per share of common stock at
the time of the grant and such incentive option may not be exercised later than
five (5) years after the date of grant. No incentive stock option will be
exercisable more than three (3) months after the holder thereof ceases to be an
employee for any reason other than death or disability, or more than one (1)
year after the holder thereof ceases to be an employee due to death or
disability. The aggregate fair market value (determined as of the respective
date or dates of grant) of shares of common stock for which one or more options
granted to any employee under the Plan (or any other option
23
PROPOSAL NO. 2
APPROVAL OF REMINGTON OIL AND GAS
CORPORATION'S 2004 STOCK INCENTIVE PLAN -- CONTINUED
plan of the Company or its affiliates) may for the first time become exercisable
as incentive stock options during any one calendar year cannot exceed $100,000.
To exercise an option granted under the Plan, the person entitled to exercise
the option must deliver to the Company payment in full of the exercise price for
the shares being purchased, together with any required withholding tax unless
other arrangements have been made with the Committee. The payment must be (i) in
cash or check, (ii) with the consent of the Committee, in shares of common stock
already owned by the person, or (iii) with the consent of the Committee, by sale
through a broker. The exercise price for and the number of shares of common
stock subject to existing options shall be subject to appropriate adjustments in
the event that the outstanding shares of common stock are changed into or
exchanged for a different number or kind of shares or other securities by reason
of merger, consolidation, recapitalization, reclassification, stock split, stock
dividend, combination of shares or the like. The Plan also permits the Committee
to reprice options, but only with stockholder and Board approval. The option
grant shall provide the time or times at which the options will be exercisable.
Purchased Stock. Subject to Board approval, the Committee has the authority to
sell shares of common stock to employees and non-employee directors on such
terms as it may establish. Subject to Board approval, the Committee may
determine the price per share of common stock to be purchased, which price may
be equal to or less than the fair market value. The purchase price of any
purchased stock must be paid in cash.
Bonus Stock. Subject to Board approval, the Committee has the authority to
grant shares of bonus stock to employees and non-employee directors for the
performance of services by such individuals without additional consideration
except as may be required by the terms of the grant.
Stock Appreciation Rights. Subject to Board approval, the Committee may grant
stock appreciation rights (rights to receive the excess of the fair market value
of the common stock on the date of exercise over the grant price, which grant
price shall not be less than the fair market value of the common stock on the
date of grant) in either cash or shares of common stock. The award may provide
that the excess may not exceed a specified amount. Stock appreciation rights may
be granted independently or in combination with an option. A stock appreciation
right granted in connection with an option may be made at the time of the grant
of the option or at any time thereafter, but prior to the expiration thereof,
and shall entitle a Plan participant, upon exercise thereof, to surrender the
option, or any portion thereof, to the extent not unexercised, and receive a
cash payment upon cancellation of the option equal to the excess of the fair
market value of a share of common stock on the date of exercise over the grant
price of the stock appreciation right. Subject to approval by the Board, the
Committee shall determine at the date of grant the time or times at which and
the circumstances under which a stock appreciation right may be exercised and
the term of such award may not exceed ten years. A stock appreciation right is
not transferable (other than by will or the laws of descent and distribution)
except, in the case of a stock appreciation right granted with an option, to the
extent that the related option is transferable.
Phantom Stock. Subject to approval by the Board, the Committee may grant
phantom stock awards, which are rights to receive a specified number of shares
of common stock, cash equal to the fair market value of a specified number of
shares of common stock, or a combination thereof at the end of a specified
deferral period. To the extent the Committee determines that any phantom stock
awards constitute performance-based compensation for purposes of Section 162(m)
of the Code, such awards may be subject to the
24
PROPOSAL NO. 2
APPROVAL OF REMINGTON OIL AND GAS
CORPORATION'S 2004 STOCK INCENTIVE PLAN -- CONTINUED
achievement of performance goals as described for performance awards. Subject to
approval by the Board, the Committee may also impose restrictions on phantom
stock awards, including a risk of forfeiture, which restrictions may lapse at
the expiration of the deferral period or at earlier specified times. Unless
provided for otherwise, upon termination of employment or services during the
applicable deferral period to which forfeiture conditions apply, all phantom
stock awards subject to deferral (other than deferral at the election of the
participant) will be forfeited; provided that the Committee (with Board
approval) may provide that restrictions or forfeiture conditions relating to the
phantom stock award will be waived in the event of a termination resulting from
specified causes. A phantom stock award is not transferable (other than by will
or the laws of descent and distribution) and the term of any such award may not
exceed ten years.
Restricted Stock Awards. Subject to approval by the Board, the Committee may
grant awards in the form of restricted shares of common stock. These awards are
subject to such restrictions as the Committee (with Board approval) may impose
including forfeiture, transfer and repurchase restrictions. In no event will the
term of any such award exceed ten years. Prior to the lapse of such
restrictions, the holder of shares of restricted stock will not be permitted to
transfer such shares. The Company will have the right to repurchase restricted
shares for the amount of cash paid for such shares, if any, if the participant
terminates employment from or services to the Company prior to the lapse of such
restrictions or the restricted stock is forfeited by the participant in
accordance with the terms of the award. A person to whom a restricted stock
award is made has all the rights of a stockholder with respect to such shares
including the right to vote the shares and receive dividends or other
distributions.
Performance Awards. The Plan authorizes the Committee to grant shares of common
stock, cash or a combination thereof to participants upon the attainment of
certain performance goals measured over a period of not less than one year nor
more than ten years. After the end of each performance period, the Committee
will determine the amount, if any, of performance awards payable to each
participant based upon the achievement of certain established business criteria.
In the case of any performance award granted to the Chief Executive Officer or
any of the Company's other four highest paid officers, the performance goals
will be objective and meet the requirements of Section 162(m) of the Code, and
regulations thereunder, including the requirement that achievement of
performance goals be substantially uncertain at the time of grant. It is the
Company's intent that performance awards granted to such covered employees will
constitute performance-based compensation within the meaning of Section 162(m)
of the Code and the regulations thereunder.
The performance goals may differ among awards or participants; however, the
Committee may not exercise discretion to increase any amount payable under a
performance award intended to comply with Section 162(m) of the Code. In
establishing performance goals, the Committee may use one or more of the
following business criteria on a consolidated basis or for specified
subsidiaries, divisions or business or units:
(i) Total shareholder return;
(ii) Return on assets, equity, capital, capital employed, or investment;
(iii) Pre-tax or after-tax profit levels, including: earnings per share;
earnings before interest and taxes; earnings before interest, taxes,
depreciation, and amortization; net operating profits after tax, and
net income;
(iv) Cash flow, free cash flow, and cash flow return on investment;
25
PROPOSAL NO. 2
APPROVAL OF REMINGTON OIL AND GAS
CORPORATION'S 2004 STOCK INCENTIVE PLAN -- CONTINUED
(v) Operational measures including growth in reserves from the prior
period and percentage or absolute increase in production from the
prior period;
(vi) Levels of cost including finding and development costs, and cash
costs (interest expense, G&A, and LOE) expressed in relationship to
Mcfe/produced during the Performance Period.
Any of the above goals shall be determined on the absolute or relative basis or
as compared to the performance of a published or special index including, but
not limited to, the Standard & Poor's 500 Stock Index or a group of comparable
companies.
The Committee (with Board approval) will determine the circumstances in which
performance awards will be paid or forfeited in the event of termination of a
participant prior to the end of a performance period or settlement of a
performance award.
Other Stock or Performance-Based Awards. The Plan also permits other stock or
performance-based awards that are denominated or payable in, valued in whole or
in part by reference to, or otherwise based on or related to our common stock
(including units or securities convertible into shares of our common stock) or
cash. The terms and conditions of any such awards will be determined by the
Committee, subject to Board approval.
TRANSFERABILITY
Except as otherwise provided in the Plan, no award and no right under the Plan,
other than purchased stock, bonus stock or restricted stock as to which
restrictions have lapsed are (i) assignable, saleable or transferable by a
participant except by will or by the laws of descent and distribution or
pursuant to a domestic relations order, or (ii) subject to any encumbrance,
pledge or charge of any nature. Any attempted transfer in violation of the Plan
will be void and ineffective for all purposes. The Committee may, however,
establish rules and procedures to allow the transfer of specific non-qualified
stock options for estate planning purposes to one or more immediate family
members or related family trusts or partnerships or similar entities.
CHANGE IN CONTROL
Unless otherwise provided in an award, upon the occurrence of a change in
control (defined generally as a merger, consolidation or acquisition, sale of
all or substantially all of the Company's assets or liquidation), the Committee
may, but is not required to, (i) accelerate vesting and the time at which all
options and stock appreciation rights then outstanding may be exercised; (ii)
waive all restrictions and conditions of all restricted stock and phantom stock
then outstanding; or (iii) determine to amend performance awards and other stock
or performance-based awards, or substitute new performance awards and other
stock or performance-based awards in consideration of the cancellation of
outstanding performance awards and any other stock or performance-based awards,
to ensure that such awards become fully vested, deemed earned in full and paid
to the participants.
TERMINATION, DEATH AND DISABILITY
Unless the award provides to the contrary, any option or restricted stock which
is not otherwise vested shall vest upon (i) termination of an employee or
removal of a non-employee director without cause, (ii) termination, removal or
resignation of any employee or non-employee director for any reason within one
year of a change in control or (iii) upon death or disability.
Unless otherwise provided for in an award, if the employment of an employee or
service of a non-employee director is terminated under any circumstances that do
not cause the participant to
26
PROPOSAL NO. 2
APPROVAL OF REMINGTON OIL AND GAS
CORPORATION'S 2004 STOCK INCENTIVE PLAN -- CONTINUED
become fully vested in an award, any nonvested award outstanding at the time of
such termination will terminate and no further vesting will occur. The
participant will be entitled to exercise his or her rights with respect to any
portion of the award which is vested until the earlier of (i) the expiration
date set forth in the award or (ii) one year after the termination date (three
(3) months after termination in the case of an incentive stock option);
provided, however, that in the event of death or disability of a participant
after termination of employment or service and before the expiration of an award
shall occur twelve moths after the date of such death or disability.
Notwithstanding the foregoing, no award may be exercised after a participant has
been terminated or removed for cause.
Subject to approval by the Board, the Committee may provide for the continuation
of any award for such period and upon such terms as it determines in the event
the participant ceases to be an employee or non-employee director.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR REORGANIZATION
The type or number of a class of shares authorized under the Plan or subject to
an award, and/or the exercise or purchase price applicable to an award will be
appropriately adjusted in the event of a subdivision or consolidation of shares,
payment of stock dividend or any other increase or decrease in the number of
shares effected without receipt of consideration by the Company, or in the event
of a reorganization, merger, consolidation or recapitalization. Such adjustments
shall be made by the Committee, subject to approval by the Board.
AMENDMENT OR TERMINATION OF THE PLAN AND AMENDMENT OF AWARDS
Except with respect to awards then outstanding, if not sooner terminated by the
Board, the Plan will terminate upon, and no further awards shall be made, after
the tenth anniversary of the date the Plan is approved by the stockholders. The
Board may amend, suspend or terminate the Plan; provided, however, that no
amendment, suspension or termination of the Plan may, without the consent of the
holder of an award, terminate such award or adversely affect such person's
rights in any material respect. Moreover, no amendment to the Plan will be
effective prior to its approval by the stockholders to the extent such approval
is required by applicable law, the requirements of the New York Stock Exchange
or any securities exchange on which the stock may be listed. The Board may,
however, amend the Plan as necessary to permit awards to meet the requirements
of the Code or other applicable laws.
Subject to the restrictions set forth in the Plan and subject to Board approval,
the Committee may amend any outstanding award and may waive or accelerate any
requirement or condition that is not mandatory under the Plan; however, except
in the case of a change in control, the Committee may not waive or accelerate
any term or condition of an award that is intended to qualify as
performance-based compensation for purposes of Section 162(m) of the Code if
such discretion would cause the award not to so qualify. The Committee may not
amend any outstanding award in a manner that would adversely affect in any
material respect the rights of a Plan participant without such participant's
consent.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
In General. The Plan is not intended to be subject to any provision of the
Employee Retirement Income Security Act of 1974, as amended, and is not
qualified under Section 401(a) of the Code. The following summary is based on
the applicable provisions of the Code, as currently in effect and the income tax
regulations and proposed income tax regulations issued thereunder.
27
PROPOSAL NO. 2
APPROVAL OF REMINGTON OIL AND GAS
CORPORATION'S 2004 STOCK INCENTIVE PLAN -- CONTINUED
Status of Options. Options granted under the Plan may be either incentive stock
options or non-qualified stock options. Under certain circumstances, an
incentive stock option may be treated as a non-qualified stock option. The tax
consequences both to the option holder and to the Company differ depending on
whether an option is an incentive stock option or a non-qualified stock option.
Nonqualified Options. No federal income tax is imposed on the option holder
upon the grant of a non-qualified stock option. Upon the exercise of a
non-qualified stock option, the option holder will be treated as receiving
compensation, taxable as ordinary income and subject to employment taxes in the
year of exercise. The amount recognized as ordinary income and subject to
employment taxes upon exercise is the excess of the fair market value of the
shares of common stock at the time of exercise over the exercise price paid for
such common stock. At the time common stock received upon exercise of a
non-qualified stock option is disposed of, any difference between the fair
market value of the shares of common stock at the time of exercise and the
amount realized on the disposition would be treated as capital gain or loss. The
gain, if any, realized upon such a disposition will be treated as long-term or
short-term capital gain, depending on the holding period of the shares of common
stock. Any loss realized upon such a disposition will be treated as a long-term
or short-term capital loss, depending on the holding period of the shares of
common stock.
Upon an option holder's exercise of a non-qualified stock option, and subject to
the application of Section 162(m) of the Code, as discussed below, the Company
may claim a deduction for the compensation paid at the same time and in the same
amount as compensation is treated as being received by the option holder,
assuming the Company satisfies the federal income tax reporting requirements
with respect to such compensation. The Company is not entitled to any tax
deduction in connection with a subsequent disposition by the option holder of
the shares of common stock.
If the shares of common stock received upon the exercise of a non-qualified
stock option are transferred to the option holder subject to certain
restrictions, then the taxable income realized by the option holder, unless the
option holder elects otherwise, and the Company's tax deduction (assuming any
federal income tax reporting requirements are satisfied) should be deferred and
should be measured with reference to the fair market value of the shares at the
time the restrictions lapse. The restrictions imposed on officers, directors and
10% stockholders by Section 16(b) of the Securities Exchange Act of 1934, as
amended, is such a restriction during the period prescribed thereby if other
shares have been purchased by such an individual within six (6) months of the
exercise of a non-qualified stock option.
Incentive Stock Options. No federal income tax is imposed on the option holder
upon the grant of an incentive stock option. The option holder would recognize
no taxable income upon exercise of an incentive stock option if the option
holder (a) does not dispose of the shares of common stock acquired pursuant to
the exercise of an incentive stock option within two (2) years from the date the
option was granted or within one (1) year after the shares of common stock were
transferred to the option holder (the "Holding Period") and (b) is an employee
of either (i) the company granting the option, (ii) the parent company or a
subsidiary of such corporation or (iii) a corporation which has assumed such
option of another corporation as a result of a corporate reorganization, merger
or similar transaction. Such employment must continue for the entire time from
the date the option was granted until three (3) months before the date of
exercise, or 12 months before the date of exercise if employment ceases due to
disability. If common stock received upon exercise of an incentive stock option
is disposed of after completion of the Holding
28
PROPOSAL NO. 2
APPROVAL OF REMINGTON OIL AND GAS
CORPORATION'S 2004 STOCK INCENTIVE PLAN -- CONTINUED
Period, any difference between the exercise price paid for such common stock and
the amount realized on the disposition would be treated as a capital gain or
loss. The gain, if any, realized upon such a disposition will be treated as
long-term capital gain. Any loss realized upon such a disposition will be
treated as a long-term capital loss. The Company would not be entitled to any
deduction in connection with the grant or exercise of the option or the
disposition of the shares of common stock so acquired.
If, however, an option holder disposes of shares of common stock acquired
pursuant to exercise of an incentive stock option before the Holding Period has
expired (a "Disqualifying Disposition"), the option holder would be treated as
having received, at the time of disposition, compensation taxable as ordinary
income and subject to employment taxes. In such event, subject to the
application of Section 162(m) of the Code, as discussed below, the Company may
claim a deduction for compensation paid at the same time and in the same amount
as compensation is treated as being received by the option holder. The amount
treated as compensation is the lesser of (i) the excess of the fair market value
of the common stock at the time of exercise over the exercise price or (ii) the
excess of the amount realized on disposition over the exercise price. The
balance of the gain, if any, realized upon such a disposition will be treated as
long-term or short-term capital gain depending on the holding period. If the
amount realized at the time of the disposition is less than the exercise price,
the option holder will not be required to treat any amount as ordinary income,
provided that the disposition is of a type that would give rise to a
recognizable loss. In such event, the loss will be treated as a long-term or
short-term capital loss depending upon the holding period. A disposition
generally includes a sale, exchange or gift, but does not include certain other
transfers, such as by reason of death or a pledge or exchange of shares
described in Section 424(c) of the Code.
Alternative Minimum Tax. Although the exercise of an incentive stock option
does not result in current taxable income, there are implications with regard to
the Alternative Minimum Tax ("AMT"). The excess of the fair market value of
shares of common stock acquired upon exercise of an incentive stock option over
the exercise price paid for such shares of common stock is an adjustment to AMT
income for the option holder's taxable year in which such exercise occurs
(unless the shares of common stock are disposed of in the same taxable year and
the amount realized is less than the fair market value of the shares on the date
of exercise, in which event the amount included in AMT income will not exceed
the amount realized on the disposition over the adjusted basis of the shares).
Payment of Option Price in Shares. In the case of a non-qualified option, if
the option price is paid by the delivery of shares of common stock previously
acquired by the option holder having a fair market value equal to the option
price ("Previously Acquired Shares"), no gain or loss would be recognized on the
exchange of the Previously Acquired Shares for a like number of shares of common
stock. The option holder's basis and holding period in the number of shares of
common stock received (to the extent equal to the number of Previously Acquired
Shares used) would be the same as his or her basis and holding period in the
Previously Acquired Shares used. The option holder would treat the fair market
value of the number of shares of common stock received in excess of the number
of Previously Acquired Shares used as ordinary compensation income. The option
holder's basis in such excess shares of common stock would be equal to their
fair market value at the time of exercise. The option holder's holding period in
such excess shares of common stock begins on the date the option holder acquires
those shares of common stock.
29
PROPOSAL NO. 2
APPROVAL OF REMINGTON OIL AND GAS
CORPORATION'S 2004 STOCK INCENTIVE PLAN -- CONTINUED
In the case of an incentive stock option, the federal income tax consequences to
the option holder of the payment of the option price with Previously Acquired
Shares depends on the nature of the Previously Acquired Shares. If the
Previously Acquired Shares were acquired through the exercise of a qualified
stock option, an incentive stock option or an option granted under an employee
stock purchase plan ("Statutory Option") and if such Previously Acquired Shares
are being transferred prior to expiration of the applicable Holding Period, the
transfer would be treated as a Disqualifying Disposition of the Previously
Acquired Shares. If the Previously Acquired Shares were acquired other than
pursuant to the exercise of a Statutory Option, or were acquired pursuant to the
exercise of a Statutory Option but have been held for the applicable Holding
Period, no gain or loss should be recognized on the exchange of the Previously
Acquired Shares. In either case, (i) the option holder's basis and holding
period in the number of shares of common stock received (to the extent equal to
the number of Previously Acquired Shares used) would be the same as his or her
basis and holding period in the Previously Acquired Shares used, increased by
any income recognized to the option holder upon the Disqualifying Disposition of
the Previously Acquired Shares, (ii) the option holder's basis in the number of
shares of common stock received in excess of the number of Previously Acquired
Shares used would be zero, (iii) the option holder's holding period in such
excess shares of common stock begins on the date the option holder acquires
those shares of common stock and (iv) the other incentive stock option rules
would apply. Upon a subsequent Disqualifying Disposition of the shares of common
stock so received, the shares with the lowest basis would be treated as disposed
of first.
Purchased Stock. The grant of purchased stock will produce immediate tax
consequences for both the participant and the Company if the consideration paid
is less than the fair market value of the stock purchased. The participant will
be treated as having received ordinary compensation income in an amount equal to
the excess of the then fair market value of the common stock awarded over the
amount, if any, paid for such shares. Subject to application of Section 162(m)
of the Code, as discussed below, the Company will receive a corresponding tax
deduction assuming any federal income tax reporting requirements are satisfied.
Bonus Stock. In general, a participant will treat the fair market value of
bonus stock awards on the date such amount is received as compensation, taxable
as ordinary income and subject to employment taxes. Subject to the application
of Section 162(m) of the Code, as discussed below, the Company will be entitled
to a deduction for the corresponding amount assuming any federal income tax
reporting requirements are satisfied.
Stock Appreciation Rights and Phantom Stock. The amount received upon exercise
of a stock appreciation right or upon receipt of cash or stock pursuant to an
award of phantom stock is included in taxable income at the time the cash or
stock is received. In the case of receipt of stock, the amount included in
income is the fair market value of the stock received. Subject to Section 162(m)
of the Code, described below, the Company will be entitled to a deduction at the
same time and in the same amount as the income recognized by the Plan
participant.
Restricted Stock. A participant who has been granted an award of restricted
stock will not realize taxable income at the time of the award, and the Company
will not be entitled to a tax deduction at the time of the award, unless the
participant makes an election to be taxed at the time of the award (called an
"83(b)" election). When the restrictions lapse without an 83(b) election by the
participant, the participant will receive taxable income in an amount equal to
the excess of the market value of the shares at such
30
PROPOSAL NO. 2
APPROVAL OF REMINGTON OIL AND GAS
CORPORATION'S 2004 STOCK INCENTIVE PLAN -- CONTINUED
time over the amount, if any, paid for such shares. The Company will be entitled
to a corresponding tax deduction assuming any federal income tax reporting
requirements are satisfied.
The 83(b) election, if made, must be made within 30 days after the restricted
stock is granted to the participant. Any dividends paid on the restricted stock
prior to vesting will be treated as additional compensation income subject to
ordinary income rates and employment taxes (and the Company will get a
corresponding deduction) if the participant does not make an 83(b) election. If
the participant makes an 83(b) election, any dividends paid on the restricted
stock will be taxed at the dividends rate. The participant's holding period for
purposes of determining short-term or long-term capital gain will begin when the
restricted stock vests if the participant does not make an 83(b) election. The
holding period begins when the restricted stock is transferred to the
participant if the participant makes an 83(b) election. The participant's basis
in his shares is the fair market value on the date the shares vest if no 83(b)
election was made. If the participant makes an 83(b) election, his basis is the
fair market value on the date of the grant.
Performance Awards. In general, a participant who receives a performance award
will not be taxed on receipt of the award, but instead the fair market value of
the common stock or the cash received will be taxable as ordinary compensation
income with respect to a performance award, on the date that the stock or cash
is transferred to the participant or in the case of a performance award of
restricted stock, the stock vests. Subject to the application of Section 162(m)
of the Code, as discussed below, the Company will be entitled to a deduction for
a corresponding amount. A grantee of a performance award of restricted stock may
elect to recognize ordinary income at the time the stock is received by making
an 83(b) election as described above.
Other Stock or Performance-based Awards. The tax consequences of other types of
"stock or performance-based awards" will depend upon the nature and terms of the
awards.
WITHHOLDING FOR TAXES
No common stock shall be issued under the Plan until arrangements satisfactory
to the Company have been made for the payment of any tax amounts that may be
required to be withheld or paid by us with respect thereto. At the discretion of
the Committee, such arrangements may include allowing the participant to tender
to us shares of common stock already owned by the participant or to request us
to withhold shares of common stock being acquired pursuant to the award which
have an aggregate fair market value equal to the amount of any tax required to
be withheld with respect to such award.
ADDITIONAL TAX CONSEQUENCES
Section 162(m) of the Code, places a $1 million cap on the deductible
compensation that may be paid to certain executives of publicly traded
corporations. Amounts that qualify as "performance based" compensation under
Section 162(m)(4)(C) of the Code, are exempt from the cap and do not count
toward the $1 million limit. Generally, options granted with an exercise price
at least equal to the fair market value of the stock on the date of grant will
qualify as performance-based compensation. Other awards may or may not so
qualify, depending on their terms.
31
PERFORMANCE GRAPH
The following performance graph compares the performance of our common stock to
the indices indicated below for the Company's last five fiscal years. The graph
assumes that the value of an investment in our common stock and in each index
was $100 at December 31, 1998, and that all dividends were reinvested.
(GRAPH)
--------------------------------------------------------------------------------------------------
12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003
--------------------------------------------------------------------------------------------------
REMINGTON 100.00 121.57 407.84 542.75 514.82 617.73
NYSE U.S. 100.00 109.50 113.80 105.20 86.30 110.20
NYSE O&G 100.00 127.00 210.00 116.50 112.80 153.90
NASDAQ U.S. 100.00 185.40 111.80 88.70 61.30 91.70
NASDAQ O&G 100.00 103.20 214.50 160.70 159.60 282.00
From December 28, 1998, through June 19, 2002, our common stock traded on the
Nasdaq Stock Exchange under the symbol ROIL. Since June 20, 2002, our common
stock has traded on the New York Stock Exchange under the symbol REM.
32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Ownership of Certain Beneficial Owners
As of April 2, 2004, the following persons held shares of the Company's common
stock in amounts totaling more than 5% of the total shares of common stock
outstanding. This information was furnished to us by such persons or statements
filed with the Commission.
SHARES OF
NAME AND ADDRESS OF COMMON STOCK PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK
------------------- ------------------ ------------
J.R. Simplot......................................... 5,425,928 20.1%
999 Main Street
Boise, Idaho 83702
Royce & Associates LLC............................... 1,608,300 6.0%
1414 Avenue of Americas
New York, New York 10019
Ownership of Management
The number of shares of the Company's common stock beneficially owned as of
April 2, 2004, by directors of the Company, each officer listed in the
compensation table on page 13, and as a group comprising all directors and
executive officers, are set forth in the following table. This information was
furnished to the Company by such persons.
SHARES OF OPTIONS
COMMON STOCK EXERCISABLE PERCENT OF
BENEFICIALLY WITHIN 60 DAYS OF COMMON
NAME OWNED APRIL 2, 2004 TOTAL STOCK
---- ------------ ----------------- --------- ----------
J. Burke Asher..................... 21,994 76,500 98,494 *
Gregory B. Cox..................... 48,546 51,787 100,333 *
Steven J. Craig.................... 37,536 24,033 61,569 *
John E. Goble, Jr. ................ 29,652 94,167 123,819 *
William E. Greenwood............... 31,265 120,000 151,265 *
Robert P. Murphy................... 50,697 138,237 188,934 *
David E. Preng..................... 65,654 130,833 196,487 *
Thomas W. Rollins.................. 23,412 95,000 118,412 *
Alan C. Shapiro.................... 21,149 120,833 141,982 *
James A. Watt...................... 139,191 253,514 392,705 1.4%
All directors and executive
officers as a group (11
persons)......................... 499,075 1,114,904 1,613,979 5.7%
---------------
* Less than one percent of the outstanding shares.
33
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - CONTINUED
The following table presents information about our equity compensation plans at
December 31, 2003:
NUMBER OF SECURITIES
TO BE ISSUED WEIGHTED AVERAGE
UPON EXERCISE OF EXERCISE PRICE OF NUMBER OF SECURITIES
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, REMAINING AVAILABLE
WARRANTS AND RIGHTS WARRANTS AND RIGHTS FOR FUTURE ISSUANCE
-------------------- -------------------- --------------------
PLAN CATEGORY (A) (B) (C)
------------- -------------------- -------------------- --------------------
Equity compensation plans
approved by stockholders...... 2,334,353 $10.93 164,013
Equity compensation plans not
approved by stockholders...... 259,636 $ 0.00 0
--------- ------ -------
Total........................... 2,593,969 $ 9.84 164,013
========= ====== =======
The information above regarding equity compensation plans not approved by the
stockholders includes contingent one-time stock grants made in 1999 to all
employees and directors, which include the following significant attributes:
- Shares awarded based on annual base salary as of June 17, 1999, or in the case
of non-employee directors $100,000, divided by $4.19 (the closing price on
June 17, 1999).
- In order for the grants to become effective, our common stock had to close at
or above $10.42 per share for 20 consecutive trading days within 5 years of
the grant date (the "trigger event").
- The trigger event was achieved on January 24, 2001.
- 686,472 shares were awarded. As of December 31, 2003, 385,989 shares have
vested, and 40,847 shares have been forfeited. Of the remaining 259,636
shares, 65,563 shares vest on June 17, 2004, and 194,073 shares vest 1/3 on
each successive January 17 beginning January 17, 2004.
- Each employee and director must remain an employee or director during his/her
respective vesting schedule in order to receive the shares.
- In the event of death, or a change of control a participant's shares will
fully vest. In the event of the long-term disability of an employee, the
employee's shares will fully vest.
34
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
None.
35
AUDIT COMMITTEE CHARTER
PURPOSE AND RESPONSIBILITIES
The Audit Committee is a standing committee of the Board of Directors. Its
purpose is to oversee the accounting and financial reporting processes of the
Company and the audits of the financial statements of the Company, including
assisting the Board of Directors oversight of (1) the integrity of the Company's
financial statements, (2) the Company's compliance with legal and regulatory
requirements, (3) the Company's Registered Public Accounting Firm's
qualifications and independence, and (4) the performance of the Company's
internal audit function and the Company's Registered Public Accounting Firm, and
preparing the Audit Committee Report that the Securities and Exchange Commission
rules require be included in the Company's annual proxy statement.
In carrying forth this purpose, the Audit Committee, as a committee of the Board
of Directors shall be directly responsible for the appointment, compensation,
and oversight of the work of the Company's Registered Public Accounting Firm
retained for the purpose of preparing or issuing an audit report and related
work. The Company's Registered Public Accounting Firm shall report directly to
the Audit Committee. The Audit Committee shall have the sole authority to retain
and terminate the Company's Registered Public Accounting Firm, and to approve
all audit engagement fees and terms and all significant non-audit engagements
with a Registered Public Accounting Firm. The Audit Committee may, but is not
required to, seek the input of the Company's management as to such matters,
provided that the Audit Committee's responsibilities are not delegated to
management. No engagement by the Company of a Registered Public Accounting Firm
in connection with an audit, quarterly reviews or other material non-audit
related work shall be valid unless the engagement letter relating to such work
has been executed by the Chairperson of the Audit Committee. As used throughout
this Audit Committee Charter, the term "Registered Public Accounting Firm" shall
have the meaning set forth in the Sarbanes-Oxley Act of 2002 (the
"Sarbanes-Oxley Act"), and shall also mean independent public accountants until
such time as independent public accountants used by the Company become
Registered Public Accounting Firms as required under the Sarbanes-Oxley Act.
Unless the context otherwise requires, as used in this Audit Committee Charter,
the term "Registered Public Accounting Firm" shall refer to the Registered
Public Accounting Firm retained for the purpose of preparing or issuing an audit
opinion on the consolidated financial statements of the Company.
The Audit Committee shall have the ultimate power of determination regarding
issues of the qualifications, performance and independence of the Company's
Registered Public Accounting Firm and shall prepare the Audit Committee Report
required by the Securities and Exchange Commission to be included in the
Company's annual proxy statement.
The Audit Committee shall establish a P.O. Box or address independent of the
Company in order to receive communications addressed to the Audit Committee.
This address shall be published in the Company's Proxy Statement and posted on
its website.
ORGANIZATION
- Appointment and Term. The members of the Audit Committee shall be appointed
annually by the vote of the majority of the Board of Directors. The Board of
Directors, by majority vote, may remove any member of the Audit Committee.
Except for the prior resignation or removal, each member of the Audit
Committee shall serve on the Audit Committee until his or her term of office
as a director of the Company expires.
- Composition. The Audit Committee shall be composed of three Independent
Directors.
- Eligibility. Only Independent Directors who receive only director fees and
expense reimbursement from the Company as compensation may be members of the
Audit Committee and only members of the
A-1
AUDIT COMMITTEE CHARTER-CONTINUED
Audit Committee may vote on matters before the Audit Committee. Decisions of
the Audit Committee shall require the affirmative vote of a majority of
members of the Audit Committee.
- Qualifications. All members of the Audit Committee must be financially
literate, and the Chairperson of the Audit Committee shall have a background
in financial reporting, accounting, auditing, or finance
- Audit Committee Financial Expert. The Audit Committee shall have an "Audit
Committee Financial Expert" on the Committee and the Company shall disclose in
its Annual Report on Form 10-K and its Proxy Statement for the Annual Meeting
that there is an "Audit Committee Financial Expert" on the Audit Committee.
The term "Audit Committee Financial Expert" shall have such meaning as
promulgated under the regulations in accordance with the Sarbanes-Oxley Act.
The "Audit Committee Financial Expert" must understand financial statements
and GAAP; have the ability to assess the general application of such
principles in connection with accounting for estimates, accruals and reserves;
have experience preparing, auditing, analyzing or evaluating financial
statements generally comparable to the Company's financial statements, or has
experience supervising one or more persons engaged in such activities;
understand internal controls and procedures for financial reporting; and
understand audit committee functions.
- Independence. All members of the Audit Committee must be Independent (as
defined in the Company's By-Laws).
- Appointment of a Chairperson. The Audit Committee shall recommend a
Chairperson from among its members to the Board of Directors for approval. It
is the responsibility of the Chairperson to schedule all meetings of the Audit
Committee and provide the Audit Committee, other members of the Board, and the
Company's Secretary with a written notice and written agenda for all meetings.
- Meetings. The Audit Committee shall meet at least four times per year or more
frequently as circumstances require. The Audit Committee may ask members of
management or others to attend the meetings and provide pertinent information
as necessary.
- Reporting and Minutes. The Audit Committee shall report to the entire Board
of Directors and shall provide all notices and minutes of meetings of the
Audit Committee to the Board of Directors. All notices, agendas, and minutes
of meetings shall be provided to the Company's management in order for payment
of any applicable meeting fees and expenses to be made.
- Power to retain Advisors. The Audit Committee is authorized and empowered to
retain such independent advisors, including counsel that the Audit Committee
may deem necessary in order to carry out its responsibilities. No engagement
shall be a valid act of the committee and no compensation for the services of
such advisors shall be paid by the Company unless, prior to such engagement,
the Company Secretary was advised of the decision to engage the advisor, a
preliminary budget for the engagement of the advisor was submitted to the
Company Secretary, the identity of the advisor was made known to the Company
Secretary so that conflicts could be checked and independence verified, and
the Company Secretary was provided an undertaking by the committee chairperson
that any and all letters, reports, and studies prepared by the advisor will be
made known and made available to the Company's Board of Directors as a whole.
- Procedures. The Audit Committee shall establish procedures for:
-- the receipt, retention, and treatment of complaints received by the Company
regarding accounting, internal accounting controls, or auditing matters.
-- the confidential, anonymous submission by Company employees of concerns
regarding questionable accounting or auditing matters.
A-2
AUDIT COMMITTEE CHARTER-CONTINUED
-- the receipt, retention, and treatment of submissions by attorneys regarding
possible violations of securities laws.
- Review of Charter. The Audit Committee shall at least on an annual basis
review and update its charter and recommend any changes to the Board of
Directors for approval.
- Annual Performance Review. The Audit Committee shall perform an annual
performance evaluation of the Audit Committee in accordance with the Company's
By-Laws.
OUTSIDE AUDITORS
- At least annually, the Audit Committee shall obtain a report by the Company's
Registered Public Accounting Firm responsible for the Company's audit and
audit related work which describes:
-- the Registered Public Accounting Firm's internal quality control
procedures,
-- any material issues raised by the most recent internal quality control
review of the Registered Public Accounting Firm,
-- any material issues raised by any inquiries or investigations by any
governmental or quasi-governmental, professional authorities or the Public
Company Accounting Oversight Board established pursuant to the
Sarbanes-Oxley Act within the preceding five years, respecting one or more
of the independent audits carried out by the Registered Public Accounting
Firm, and any steps taken to deal with such issues, and
-- all relationships between the Registered Public Accounting Firm and the
Company, so that the Audit Committee may assess the Registered Public
Accounting Firm's independence.
- This report from the Registered Public Accounting Firm shall be in addition to
an on-going duty of the Registered Public Accounting Firm and the Audit
Committee to engage in a continuing dialog regarding any matters,
relationships or services that may affect the objectivity of the Registered
Public Accounting Firm. In this regard the Audit Committee may require a
statement from the Registered Public Accounting Firm on a basis more frequent
than annually regarding all relationships between the Registered Public
Accounting Firm and the Company. The Audit Committee shall take such action as
is appropriate in response to the Registered Public Accounting Firm's report
to satisfy itself as to the Firm's independence.
- The Audit Committee shall at least on an annual basis review and evaluate the
performance of the Registered Public Accounting Firm's lead partner
responsible for the Company's audit and see that such partner is rotated off
the Company's audit at least as frequently (5 years) as required by the
Sarbanes-Oxley Act. The Company's management and the personnel responsible for
the Company's internal audit function should be consulted in relation to this
review. The Audit Committee should also consider whether there should be a
rotation on a regular basis of the Registered Public Accounting Firm
responsible for the Company's audit.
- The Audit Committee should present its conclusions regarding the independence
of the Registered Public Accounting Firm to the Board of Directors.
- Subject to ratification by the vote of at least a majority of the members of
the Audit Committee, the Chairman of the Audit Committee, in his discretion,
may approve up to $50,000 in fees to the Company's Registered Public
Accounting Firm arising from matters outside of the primary engagement letter
between the Company and firm.
A-3
AUDIT COMMITTEE CHARTER-CONTINUED
OVERSIGHT RESPONSIBILITIES
- The Audit Committee shall discuss the Company's annual audited financial
statements and quarterly financial statements with management and the
Registered Public Accounting Firm including the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Audit Committee should also review and discuss Company
earnings press releases (paying particular attention to any use of "pro
forma," or "adjusted" non-GAAP information), as well as financial information
and earnings guidance provided to analysts and rating agencies.
- The Audit Committee shall discuss policies with respect to risk assessment and
risk management, and should review and evaluate the effectiveness of the
Company's process for assessing significant risks or exposures and the steps
management has taken to minimize such risks to the Company.
- The Audit Committee should consider and review with management and the
Registered Public Accounting Firm:
-- the effectiveness of or weaknesses in the Company's internal controls
including the Company's internal audit function, computerized information
system controls and security, the overall control environment, and
accounting and financial controls.
-- any related significant findings and recommendations of the Registered
Public Accounting Firm together with management's responses thereto,
including the timetable for implementation of recommendations to correct
weaknesses in internal controls.
- The Audit Committee shall review with the Registered Public Accounting Firm
the coordination of audit efforts to assure completeness of coverage of key
business controls and risk areas, reduction of redundant efforts, and the
effective use of audit resources.
- The Audit Committee shall discuss with management and the Company's Registered
Public Accounting Firm the status and adequacy of management information
systems and other information technology, including the significant risks
related thereto and major controls over such activities.
- The Audit Committee shall set clear hiring guidelines for employees or former
employees of the Company's Registered Public Accounting Firm.
- The Audit Committee shall report regularly to the Board of Directors. In doing
so, the Audit Committee should review with the full Board of Directors any
issues that arise with respect to the quality or integrity of the Company's
financial statements, the Company's compliance with legal or regulatory
requirements, the performance and independence of the Company's Registered
Public Accounting Firm and the performance of the Company's internal audit
function.
FINANCIAL REPORTING
- Although it is not the responsibility of the Audit Committee to prepare the
Company's financial statements and disclosures, the Audit Committee must
review:
-- major issues regarding accounting principles and financial statement
presentations, including any significant changes in the Company's selection
or application of accounting principles, and major issues as to the
adequacy of the Company's internal controls and any special audit steps
adopted in light of material control deficiencies;
-- analyses prepared by the Company's management and or the Registered Public
Accounting Firm setting forth significant financial reporting issues and
judgments made in connection with the preparation of the Company's
financial statements, including analyses of the effects of alternative GAAP
methods on financial statements; and
A-4
AUDIT COMMITTEE CHARTER-CONTINUED
-- the effect of regulatory accounting initiatives, as well as any off-balance
sheet structures, on the Company's financial statements.
- The Audit Committee shall regularly review with the Company's Registered
Public Accounting Firm any audit problems or difficulties encountered in the
course of the audit work and the response of the Company's management to such
problems or difficulties. Such regular review shall include any restrictions
on the scope of the Registered Public Accounting Firm's activities or
requested information, and any significant disagreement with management. To
that end, the Audit Committee should review and discuss the following items
with the Registered Public Accounting Firm:
-- any accounting adjustments that were noted or proposed by the Registered
Public Accounting Firm but were "passed" (as immaterial or otherwise);
-- any communications between the Registered Public Accounting Firm's audit
team and the Registered Public Accounting Firm's national office respecting
auditing or accounting issues presented by the engagement;
-- any "management" or "internal control" letter issued, or proposed to be
issued, by the Registered Public Accounting Firm to the Company; and
-- the responsibilities, budget and staffing of the Company's internal audit
function.
- The Audit Committee shall review the Company's filings with the Securities and
Exchange Commission and other agencies and other published documents
containing the Company's financial statements, including annual and interim
reports, press releases and statutory filings, and consider whether the
information contained in these documents is consistent with the information
contained in the Company's financial statements.
- The Audit Committee shall review with management and the Company's Registered
Public Accounting Firm at the completion of the annual examination:
-- the Company's annual financial statements and related footnotes.
-- the Registered Public Accounting Firm's audit of the financial statements
and their report thereon.
-- any significant changes required in the Registered Public Accounting Firm's
audit plan.
-- any serious difficulties or disputes with management encountered during the
course of the audit.
-- the existence of significant estimates and judgments underlying the
financial statements, including the rationale behind those estimates as
well as the details on material accruals and reserves.
-- other matters related to the conduct of the audit which are to be
communicated to the Audit Committee under generally accepted auditing
standards or applicable standards established by the Public Company
Accounting Oversight Board.
-- review and approve the Company's accounting principles.
- The Audit Committee shall review with management and the Registered Public
Accounting Firm at the completion of the quarterly review and the annual audit
prior to the filing of the Forms 10-Q and 10-K, respectively, the matters set
forth above and other matters contained within Statement of Auditing Standards
61, including, but not limited to, significant adjustments, management
judgments and accounting estimates, significant new accounting policies and
disagreements with management and as such standards as may be promulgated by
the Public Company Accounting Oversight Board.
A-5
AUDIT COMMITTEE CHARTER-CONTINUED
AUDIT COMMITTEE REPORT
- In connection with the annual audit of the Company's financial statements and
the Audit Committee's discussions with the Company's Registered Public
Accounting Firm and the Company's management, the Audit Committee shall
provide a report in the Company's proxy statement, no less frequently than
required by the rules and regulations of the Securities and Exchange
Commission, stating whether the Audit Committee has reviewed and discussed the
audited financial statements with management, whether the Audit Committee has
discussed with the Registered Public Accounting Firm the matters required to
be discussed pursuant to Statement of Auditing Standards 61 and any other
applicable standards and whether the Audit Committee has received the written
disclosures and the letter from the Registered Public Accounting Firm required
by Independence Standards Board Standard No. 1 and has discussed with the
Registered Public Accounting Firm its independence.
COMPLIANCE WITH LAWS AND REGULATIONS
- The Audit Committee shall ascertain whether the Company has an effective
process for determining risks and exposures from asserted and unasserted
litigation and claims and from noncompliance with laws and regulations.
- The Audit Committee shall review with the Company's general counsel and others
any legal, tax, or regulatory matters that may have a material impact on
Company operations and the financial statements, related Company compliance
policies, and programs and reports received from regulators.
COMPLIANCE WITH CODES OF ETHICAL CONDUCT
- The Audit Committee shall review and assess the Company's processes for
administering those sections of the Company's Corporate Governance Guidelines
and the Company's Code of Business Conduct and Ethics which relate to matters
within the purview of the Audit Committee Charter.
- The Audit Committee shall review with the Registered Public Accounting Firm
the results of the Registered Public Accounting Firm's review of the Company's
monitoring of compliance with the Company's Corporate Governance Guidelines
and the Company's Code of Business Conduct and Ethics, including compliance
with the Foreign Corrupt Practices Act.
- The Audit Committee shall review policies and procedures with respect to
officers' expense accounts and perquisites, including their use of corporate
assets, and consider the results of any review of these areas by the
Registered Public Accounting Firm.
- Procedures for Addressing Complaints about Accounting Matters
-- The following procedures are established to receive and handle complaints
of the Company's employees regarding accounting , internal auditing
controls and auditing matters, including complaints regarding attempted or
actual circumvention of internal accounting controls or complaints
regarding violations of the Company's accounting principles ("Accounting
Complaints").
-- In the discretion of the Audit Committee, the responsibilities of the Audit
Committee in regard to these procedures may be delegated to the Chairman of
the Audit Committee.
-- An employee of the Company may make an Accounting Complaint directly to the
Audit Committee Chairman in writing to the attention of the Audit Committee
Chairman at the following address:
John E. Goble, Jr.
8144 Walnut Hill Lane
Suite 982, LB 51
Dallas, Texas 75231
A-6
AUDIT COMMITTEE CHARTER-CONTINUED
-- Any Accounting Complaint correspondence should be clearly marked as an
urgent matter for consideration by the Audit Committee. Upon receipt of
such a communication, the Audit Committee Chairman will provide the
Company's General Counsel with a copy of such correspondence. The General
Counsel will summarize the correspondence in reasonable detail including
the date of receipt by the Audit Committee Chairman, the nature of the
complaint, the specific allegations of the complaint, whether the
allegations constitute an Accounting Complaint, and the proposed process of
investigation. This correspondence prepared by the General Counsel shall be
provided to the Audit Committee Chairman and members of the Audit
Committee. The decision whether to initiate any investigation will be with
the Audit Committee with the assistance of the General Counsel.
-- In the event an Accounting Complaint involves or implicates the General
Counsel, the General Counsel shall recuse himself from the matter, and
inform the Audit Committee in writing. The Audit Committee shall promptly
after receipt of such recusal appoint outside counsel.
-- The Audit Committee with the assistance of the General Counsel will
investigate any complaint determined to be an Accounting Complaint. Upon
completion of the investigation the Audit Committee with assistance of the
General Counsel shall prepare a report which includes the result of the
investigation. Any report shall be prepared in reasonable detail including
and shall be in addition to any information previously provided to the
Audit Committee by the General Counsel. The report at a minimum will
include a description of the Accounting Complaint, the steps taken in the
investigation, any factual findings, and the recommendations for any
corrective actions, if any.
-- All investigations are to be conducted in a confidential manner, so that
information will be disclosed only as needed to facilitate review of the
investigation materials, or otherwise as required by law.
-- In conduct of any investigation, the Audit Committee shall have all the
powers generally granted it under the Audit Committee Charter.
-- Consistent with the policies of the Company, the Audit Committee, the
General Counsel and the Company's management will not retaliate or attempt
to retaliate, and will not tolerate any retaliation or attempted
retaliation by any other person or group, directly or indirectly, against
anyone who, in good faith, makes an Accounting Complaint, or provides
assistance to the Audit Committee, the General Counsel or the Company's
management or any other person or group, including any governmental,
regulatory or law enforcement body, investigating or otherwise helping to
resolve an Accounting Complaint.
-- Employees of the Company are specifically authorized to make Accounting
Complaints using the procedures described in this Audit Committee Charter
on a confidential or anonymous basis. All Accounting Complaints received
from employees will be treated confidentially or anonymously, as
applicable, to the extent reasonable and practicable under the
circumstances.
-- The Audit Committee and the General Counsel will retain on a strictly
confidential basis for a period of seven years all records relating to any
Accounting Complaint and to investigation and resolution thereof. All such
records are confidential to the Company and protected by attorney-client
privilege and/or the attorney work product doctrine. Such records will be
considered privileged and confidential.
-- The Company will cause these procedures to be communicated to all employees
and posted on the Company's website as part of the Company's Audit
Committee Charter.
A-7
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN
MAY 24, 2004
B-1
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
ARTICLE I INTRODUCTION.............................................. B-4
1.1 Purpose..................................................... B-4
1.2 Definitions................................................. B-4
1.3 Shares Subject to the Plan.................................. B-7
1.4 Administration of the Plan.................................. B-7
1.5 Amendment and Discontinuance of the Plan.................... B-7
1.6 Granting of Awards to Participants.......................... B-7
1.7 Term of Plan................................................ B-8
1.8 Leave of Absence............................................ B-8
ARTICLE II NON-QUALIFIED STOCK OPTIONS.............................. B-8
2.1 Eligibility................................................. B-8
2.2 Exercise Price.............................................. B-8
2.3 Terms and Conditions of Options............................. B-8
2.4 Option Repricing............................................ B-9
2.5 Amendment................................................... B-9
2.6 Acceleration of Vesting..................................... B-10
ARTICLE III INCENTIVE OPTIONS....................................... B-10
3.1 Eligibility................................................. B-10
3.2 Exercise Price.............................................. B-10
3.3 Dollar Limitation........................................... B-10
3.4 10% Stockholder............................................. B-10
3.5 Options Not Transferable.................................... B-10
3.6 Compliance with 422......................................... B-10
3.7 Limitations on Exercise..................................... B-10
ARTICLE IV PURCHASED STOCK.......................................... B-11
4.1 Eligible Persons............................................ B-11
4.2 Purchase Price.............................................. B-11
4.3 Payment of Purchase Price................................... B-11
ARTICLE V BONUS STOCK............................................... B-11
ARTICLE VI STOCK APPRECIATION RIGHTS AND PHANTOM STOCK.............. B-11
6.1 Stock Appreciation Rights................................... B-11
6.2 Phantom Stock Awards........................................ B-12
ARTICLE VII RESTRICTED STOCK........................................ B-12
7.1 Eligible Persons............................................ B-12
7.2 Restricted Period and Vesting............................... B-12
B-2
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
ARTICLE VIII PERFORMANCE AWARDS..................................... B-13
8.1 Performance Awards.......................................... B-13
8.2 Performance Goals........................................... B-13
ARTICLE IX OTHER STOCK OR PERFORMANCE-BASED AWARDS.................. B-15
ARTICLE X CERTAIN PROVISIONS APPLICABLE TO ALL AWARDS............... B-15
10.1 General..................................................... B-15
10.2 Stand-Alone, Additional, Tandem, and Substitute Awards...... B-15
10.3 Term of Awards.............................................. B-16
10.4 Form and Timing of Payment under Awards; Deferrals.......... B-16
10.5 Vested and Unvested Awards.................................. B-16
10.6 Exemptions from Section 16(b) Liability..................... B-16
10.7 Securities Requirements..................................... B-16
10.8 Transferability............................................. B-17
10.9 Rights as a Stockholder..................................... B-17
10.10 Listing and Registration of Shares of Common Stock.......... B-17
10.11 Termination of Employment, Death and Disability............. B-17
10.12 Change in Control........................................... B-18
ARTICLE XI WITHHOLDING FOR TAXES.................................... B-18
ARTICLE XII MISCELLANEOUS........................................... B-19
12.1 No Rights to Awards......................................... B-19
12.2 No Right to Employment...................................... B-19
12.3 Governing Law............................................... B-19
12.4 Severability................................................ B-19
12.5 Other Laws.................................................. B-19
B-3
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
ARTICLE I
INTRODUCTION
1.1 PURPOSE. The Remington Oil and Gas Corporation 2004 Stock Incentive Plan
(the "Plan") is intended to promote the interests of Remington Oil and Gas
Corporation, a Delaware corporation, (the "Company") and its stockholders by
encouraging Employees and Non-Employee Directors of the Company or its
Affiliates (as defined below) to acquire or increase their equity interests in
the Company, thereby giving them an added incentive to work toward the continued
growth and success of the Company. The Board of Directors of the Company (the
"Board") also contemplates that through the Plan, the Company and its Affiliates
will be better able to compete for the services of the individuals needed for
the continued growth and success of the Company.
1.2 DEFINITIONS. As used in the Plan, the following terms shall have the
meanings set forth below:
"Affiliate" means (i) any entity in which the Company, directly or
indirectly, owns 10% or more of the combined voting power, as determined by
the Committee, (ii) any "parent corporation" of the Company (as defined in
section 424(e) of the Code), (iii) any "subsidiary corporation" of any such
parent corporation (as defined in section 424(f) of the Code) of the
Company and (iv) any trades or businesses, whether or not incorporated
which are members of a controlled group or are under common control (as
defined in Sections 414(b) or (c) of the Code) with the Company.
"Awards" means, collectively, Options, Purchased Stock, Bonus Stock, Stock
Appreciation Rights, Phantom Stock, Restricted Stock, Performance Awards,
or Other Stock or Performance Based Awards.
"Bonus Stock" is defined in Article V.
"Cause" for termination of any Participant who is a party to an agreement
of employment with or services to the Company shall mean termination for
"Cause" as such term is defined in such agreement, the relevant portions of
which are incorporated herein by reference. If such agreement does not
define "Cause" or if a Participant is not a party to such an agreement,
"Cause" means (i) the willful commission by a Participant of a criminal or
other act that causes or is likely to cause substantial economic damage to
the Company or an Affiliate or substantial injury to the business
reputation of the Company or Affiliate; (ii) the commission by a
Participant of an act of fraud in the performance of such Participant's
duties on behalf of the Company or an Affiliate; or (iii) the continuing
willful failure of a Participant to perform the duties of such Participant
to the Company or an Affiliate (other than such failure resulting from the
Participant's incapacity due to physical or mental illness) after written
notice thereof (specifying the particulars thereof in reasonable detail)
and a reasonable opportunity to be heard and cure such failure are given to
the Participant by the Committee. For purposes of the Plan, no act, or
failure to act, on the Participant's part shall be considered "willful"
unless done or omitted to be done by the Participant not in good faith and
without reasonable belief that the Participant's action or omission was in
the best interest of the Company or an Affiliate, as the case may be.
"Change in Control" shall be deemed to have occurred upon any of the
following events:
(i) A merger or consolidation to which the Company is a party if the
individuals and entities who were stockholders of the Company
immediately prior to the effective date of such a merger or
consolidation have beneficial ownership (as defined in Rule 13d-3 under
the Exchange Act) of less than 50% of the total combined voting power
for election of directors of the surviving corporation following the
effective date of such merger or consolidation;
B-4
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
(ii) The acquisition or holding of direct or indirect beneficial
ownership (as defined under Rule 13d-3 of the Exchange Act) of
securities of the Company representing the aggregate 30% or more of the
total combined voting power of the Company's then issued and outstanding
voting securities by any person, entity or group of associated persons
or entities acting in concert, other than S-Sixteen Holding Company, any
employee benefit plan of the Company or of any subsidiary of the
Company, or any entity holding such securities for or pursuant to the
terms of any such plan, beginning from and after such time S-Sixteen
Holding Company shall no longer have direct or indirect beneficial
ownership (as so defined) of securities of the Company representing in
the aggregate a larger percentage of the total combined voting power of
the Company's then issued and outstanding securities than that held by
any other person, entity or group;
(iii) The sale of all or substantially all of the assets of the Company
to any person or entity that is not a wholly owned subsidiary of the
Company; or
(iv) The approval by the stockholders of the Company of any plan or
proposal for the liquidation of the Company or its material
subsidiaries, other than into the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations thereunder.
"Committee" means the Compensation Committee appointed by the Board to
administer the Plan or, if none, the Board; provided however, that with
respect to any Award granted to a Covered Employee which is intended to be
"performance-based compensation" as described in Section 162(m)(4)(c) of
the Code, the Committee shall consist solely of two or more "outside
directors" as described in Section 162(m)(4)(c)(i) of the Code.
"Common Stock" means the common stock of the Company, no par value (stated
value $.01 per share).
"Covered Employee" shall mean the Chief Executive Officer of the Company or
the four highest paid officers of the Company other than the Chief
Executive Officer as described in Section 162(m)(3) of the Code.
"Disability" means an inability to perform the Participant's material
services for the Company for a period of 180 consecutive days during any
365-day period as a result of incapacity due to mental or physical illness,
which is determined to be permanent. A determination of Disability shall be
made by a physician satisfactory to both the Participant (or his guardian)
and the Company, provided that if the Participant (or his guardian) and the
Company do not agree on a physician, the Participant and the Company shall
each select a physician and these two together shall select a third
physician, whose determination as to Disability shall be binding on all
parties. Eligibility for disability benefits under any policy for long-term
disability benefits provided to the Participant by the Company shall
conclusively establish the Participant's disability.
"Effective Date" means the date that is (i) adopted by the Board; and (ii)
approved by shareholders of the Company, provided that such shareholder
approval occurs not more than one-year prior to or after the date of such
adoption. The provisions of the Plan are applicable to all Awards granted
on or after the Effective Date.
"Employee" means any common law employee of the Company or an Affiliate.
B-5
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
"Employment" includes any period in which a Participant is an Employee to
the Company or an Affiliate.
"Fair Market Value or FMV Per Share". The Fair Market Value or FMV Per
Share of the Common Stock shall be the closing price on the New York Stock
Exchange or other national securities exchange or over-the-counter market,
if applicable, for the date of the determination, or if no trade of the
Common Stock shall have been reported for such date, the closing sales
price quoted on such exchange for the most recent trade prior to the
determination date. If shares of the Common Stock are not listed or
admitted to trading on any exchange, over-the-counter market or any similar
organization as of the determination date, the FMV Per Share shall be
determined by the Committee in good faith using any fair and reasonable
means selected in its discretion.
"Incentive Option" means any option that satisfies the requirements of Code
Section 422 and is granted pursuant to Article III of the Plan.
"Non-Employee Director" means persons who are members of the Board but who
are not Employees of the Company or any Affiliate. Non-Employee Director
shall include any non-elected director emeritus serving in an advisory
capacity to the Board.
"Non-Qualified Option" shall mean an option not intended to satisfy the
requirements of Code Section 422 and which is granted pursuant to Article
II of the Plan.
"Option" means an option to acquire Common Stock granted pursuant to the
provisions of the Plan, and refers to either an Incentive Stock Option or a
Non-Qualified Stock Option, or both, as applicable.
"Option Expiration Date" means the date determined by Committee, which
shall not be more than ten years after the date of grant of an Option.
"Optionee" means a Participant who has received or will receive an Option.
"Other Stock or Performance-Based Award" means an award granted pursuant to
Article IX of the Plan that is not otherwise specifically provided for, the
value of which is based in whole or in part upon the value of a share of
Common Stock.
"Participant" means any Non-Employee Director or Employee granted an Award
under the Plan.
"Performance Award" means an Award granted pursuant to Article VIII of the
Plan, which, if earned, shall be payable in shares of Common Stock, cash or
any combination thereof.
"Purchased Stock" means a right to purchase Common Stock granted pursuant
to Article IV of the Plan.
"Phantom Shares" means an Award of the right to receive shares of Common
Stock issued at the end of a Restricted Period that is granted pursuant to
Article VI 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 of Common Stock, prior to the lapse
of restrictions thereon, granted under Article VII of the Plan.
"Spread" means the amount determined pursuant to Section 6.1(a) of the
Plan.
"Stock Appreciation Rights" means an Award granted pursuant to Article VI
of the Plan.
B-6
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
1.3 SHARES SUBJECT TO THE PLAN. The aggregate number of shares of Common Stock
that may be issued under the Plan shall not exceed 2,000,000 shares of Common
Stock (subject to adjustment as described below). In addition, during any
calendar year, the number of shares of Common Stock issued or reserved for
issuance as options under the Plan to any one Participant plus the number of
such shares underlying Stock Appreciation Rights that may be granted to that
same Participant shall not exceed 250,000 shares. Notwithstanding the above,
however, in the event that at any time after the Effective Date the outstanding
shares of Common Stock are changed into or exchanged for a different number or
kind of shares or other securities of the Company by reason of a merger,
consolidation, recapitalization, reclassification, stock split, stock dividend,
combination of shares or the like, the aggregate number and class of securities
available under the Plan shall be ratably adjusted by the Committee. Upon the
occurrence of any of the events described in the immediately preceding sentence,
in order to ensure that after such event the shares of Common Stock subject to
the Plan and each Participant's proportionate interest shall be maintained
substantially as before the occurrence of such event, the Committee shall, in
such manner as it may deem equitable, adjust (i) the number of shares of Common
Stock with respect to which Awards may be granted, (ii) the number of shares of
Common Stock subject to outstanding Awards, and (iii) the grant or exercise
price with respect to an Award. Such adjustment in an outstanding Option shall
be made (i) without change in the total price applicable to the Option or any
unexercised portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and (ii) with any
necessary corresponding adjustment in exercise price per share. The Committee's
determinations shall be subject to approval by the Board. In the event the
number of shares to be delivered upon the exercise or payment of any Award
granted under the Plan is reduced for any reason whatsoever or in the event any
Award (or portion thereof) granted under the Plan can no longer under any
circumstances be exercised or paid, the number of shares no longer subject to
such Award shall thereupon be released from such Award and shall thereafter be
available under the Plan for the grant of additional Awards. Shares that cease
to be subject to an Award because of the exercise of the Award, or the vesting
of a Restricted Stock Award or similar Award, shall no longer be subject to any
further grant under the Plan. Shares issued pursuant to the Plan (i) may be
treasury shares, authorized but unissued shares or, if applicable, shares
acquired in the open market and (ii) shall be fully paid and nonassessable. No
fractional shares shall be issued under the Plan; payment for any fractional
shares shall be made in cash.
1.4 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 Awards under the Plan, shall make such rules as it deems
necessary for the proper administration of the Plan, shall make all other
determinations necessary or advisable for the administration of the Plan and
shall correct any defect or supply any omission or reconcile any inconsistency
in the Plan or in any Award under the Plan in the manner and to the extent that
the Committee deems desirable to effectuate the Plan. No member of the Committee
shall vote or act upon any matter relating solely to himself. Grants of Awards
to any Participant, the terms thereof and any amendment thereto shall be subject
to approval by the Board.
1.5 AMENDMENT AND DISCONTINUANCE OF THE PLAN. The Board may amend, suspend or
terminate the Plan; provided, however, no amendment, suspension or termination
of the Plan may without the consent of the holder of an Award terminate such
Award or adversely affect such person's rights with respect to such Award in any
material respect; provided further, however, that any amendment which would
constitute a "material revision" of the Plan (as that term is used in the rules
of the New York Stock Exchange) shall be subject to shareholder approval.
1.6 GRANTING OF AWARDS TO PARTICIPANTS. Subject to approval of the Board, the
Committee shall have the authority to grant, prior to the expiration date of the
Plan, Awards to such Employees and Non-
B-7
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
Employee Directors as may be selected by it on the terms and conditions
hereinafter set forth in the Plan. In selecting the persons to receive Awards,
including the type and size of the Award, the Committee may consider any factors
that it may deem relevant.
1.7 TERM OF PLAN. If not sooner terminated under the provisions of the Plan,
the Plan shall terminate upon, and no further Awards shall be made, after the
tenth (10th) anniversary of the Effective Date.
1.8 LEAVE OF ABSENCE. If an Employee is on military, sick leave or other bona
fide leave of absence, such person shall be considered an "Employee" for
purposes of an outstanding Award during the period of such leave provided it
does not exceed 90 days, or, if longer, so long as the person's right to re-
employment is guaranteed either by statute or by contract. If the period of
leave exceeds 90 days, the employment relationship shall be deemed to have
terminated on the 91st day of such leave, unless the person's right to
re-employment is guaranteed by statute or contract.
ARTICLE II
NON-QUALIFIED STOCK OPTIONS
2.1 ELIGIBILITY. All Employees and Non-Employee Directors shall be eligible
for grants of Options according to the terms set forth below. Each Non-Qualified
Option granted under the Plan shall be evidenced by a written agreement between
the Company and the individual to whom Non-Qualified Options were granted.
2.2 EXERCISE PRICE. The exercise price to be paid for each share of Common
Stock deliverable upon exercise of each Option granted under this Article II
shall not be less than the FMV Per Share on the date of grant of such Option.
The exercise price for each Option granted under Article II shall be subject to
adjustment as provided in Section 2.3(d).
2.3 TERMS AND CONDITIONS OF OPTIONS. Options shall be in such form as the
Committee may from time to time recommend and the Board shall approve, shall be
subject to the following terms and conditions and may contain such additional
terms and conditions as are not inconsistent with this Article II:
(a) Option Period and Conditions and Limitations on Exercise. No Option
shall be exercisable later than the Option Expiration Date. To the extent
not prohibited by other provisions of the Plan, each Option shall be
exercisable at such time or times as may be determined at the time such
Option is granted.
(b) Manner of Exercise. In order to exercise an Option, the person or
persons entitled to exercise it shall deliver to the Company payment in
full for (i) the shares being purchased, and (ii) unless other arrangements
have been made with the Committee, any required withholding taxes. The
payment of the exercise price for each Option shall either be (i) in cash
or by check payable and acceptable to the Company, (ii) with the consent of
the Committee, by tendering to the Company shares of Common Stock having an
aggregate Fair Market Value as of the date of exercise that is not greater
than the full exercise price for the shares with respect to which the
Option is being exercised and by paying any remaining amount of the
exercise price as provided in (i) above, or (iii) with the consent of the
Committee and subject to such instructions as the Committee may specify, at
the person's written request the Company may deliver certificates for the
shares of Common Stock for which the Option is being exercised to a broker
for sale on behalf of the person, provided that the person has irrevocably
instructed such broker to remit directly to the Company on the person's
behalf the full amount of the exercise price from the proceeds of such
sale. In the event that the Optionee elects to make payment as allowed
under clause (ii) above, the Committee may, upon confirming that the
Optionee owns the number of additional shares being tendered, authorize the
issuance of a new
B-8
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
certificate for the number of shares being acquired pursuant to the
exercise of the Option less the number of shares being tendered upon the
exercise and return to the person (or not require surrender of) the
certificate for the shares being tendered upon the exercise. If the
Committee so requires, such person or persons shall also deliver a written
representation that all shares being purchased are being acquired for
investment and not with a view to, or for resale in connection with, any
distribution of such shares.
(c) Options not Transferable. Except as provided below, no Non-Qualified
Option granted hereunder shall be transferable other than by (i) will or by
the laws of descent and distribution or (ii) pursuant to a domestic
relations order and, during the lifetime of the Participant to whom any
such Option is granted, and it shall be exercisable only by the Participant
(or his guardian). Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or similar
process, any Option granted hereunder, or any right thereunder, contrary to
the provisions hereof, shall be void and ineffective and shall give no
right to the purported transferee. With Committee approval, the Participant
(or his guardian) may transfer, for estate planning purposes, all or part
of a Non-Qualified Option to one or more immediate family members or
related family trusts or partnerships or similar entities.
(d) Adjustment of Options. In the event that at any time after the
Effective Date the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares or other securities of
the Company by reason of merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or the
like, the Committee shall make an appropriate and equitable adjustment in
the number and kind of shares and the exercise price as provided in Section
1.3.
(e) Listing and Registration of Shares. Each Option shall be subject to
the requirement that if at any time the Committee determines that the
listing, registration, or qualification of the shares subject to such
Option under any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary
or desirable as a condition of, or in connection with, the issue or
purchase of shares thereunder, such Option may not be exercised in whole or
in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained and the same shall have been
free of any conditions not acceptable to the Committee.
2.4 OPTION REPRICING. With Board and shareholder approval, the Committee may
grant to holders of outstanding Non-Qualified Options, in exchange for the
surrender and cancellation of such Non-Qualified Options, new Non-Qualified
Options having exercise prices lower (or higher with any required consent) than
the exercise price provided in the Non-Qualified Options so surrendered and
canceled and containing such other terms and conditions as the Committee may
deem appropriate.
2.5 AMENDMENT. Subject to Board approval, the Committee may, without the
consent of the person or persons entitled to exercise any outstanding Option,
amend, modify or terminate such Option; provided, however, such amendment,
modification or termination shall not, without such person's consent, reduce or
diminish the value of such Option determined as if the Option had been
exercised, vested, cashed in or otherwise settled on the date of such amendment
or termination. Subject to Board approval, the Committee may at any time or from
time to time, in the case of any Option which is not then immediately
exercisable in full, accelerate the time or times at which such Option may be
exercised to any earlier time or times.
B-9
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
2.6 ACCELERATION OF VESTING. Any Option granted hereunder which is not
otherwise vested shall vest (unless specifically provided to the contrary in the
document or instrument evidencing an Option granted hereunder) upon (i)
termination of an Employee or removal of a Non-Employee Director without Cause;
(ii) termination or removal of an Employee or Non-Employee Director for any
reason within one (1) year from the effective date of the Change in Control; or
(iii) death or Disability of the Participant.
ARTICLE III
INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options. Except
as modified by the provisions of this Article III, all the provisions of Article
II shall be applicable to Incentive Options. Options which are specifically
designated as Non-Qualified Options shall NOT be subject to the terms of this
Section III.
3.1 ELIGIBILITY. Incentive Options may only be granted to Employees.
3.2 EXERCISE PRICE. The exercise price per Share shall not be less than one
hundred percent (100%) of the FMV Per Share on the option grant date.
3.3 DOLLAR LIMITATION. The aggregate Fair Market Value (determined as of the
respective date or dates of grant) of shares of Common Stock for which one or
more options granted to any Employee under the Plan (or any other option plan of
the Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one (1) calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
3.4 10% STOCKHOLDER. If any Employee to whom an Incentive Option is granted
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any "parent corporation" of the
Company (as defined in Section 424(e) of the Code) or any "subsidiary
corporation" of the Company (as defined in Section 424(f) of the Code), then the
exercise price per share shall not be less than one hundred ten percent (110%)
of the FMV Per Share on the date of grant and the option term shall not exceed
five (5) years measured from the date of grant. For purposes of the immediately
preceding sentence, the attribution rules under Section 424(d) of the Code shall
apply for purposes of determining an Employee's ownership.
3.5 OPTIONS NOT TRANSFERABLE. No Incentive Option granted hereunder shall be
transferable other than by will or by the laws of descent and distribution and
shall be exercisable during the Optionee's lifetime only by such Optionee.
3.6 COMPLIANCE WITH 422. All Options that are intended to be Incentive Stock
Options shall be designated as such in the Option grant and in all respects
shall be issued in compliance with Code Section 422.
3.7 LIMITATIONS ON EXERCISE. No Incentive Option shall be exercisable more
than three (3) months after the Optionee ceases to be an Employee for any reason
other than death or Disability, or more than one (1) year after the Optionee
ceases to be an Employee due to death or Disability.
B-10
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
ARTICLE IV
PURCHASED STOCK
4.1 ELIGIBLE PERSONS. Subject to approval by the Board, the Committee shall
have the authority to sell shares of Common Stock to such Employees and
Non-Employee Directors of the Company or its Affiliates as may be selected by
it, on such terms and conditions as it may establish, subject to the further
provisions of this Article IV. Each issuance of Common Stock under this Plan
shall be evidenced by an agreement which shall be subject to applicable
provisions of this Plan and to such other provisions not inconsistent with this
Plan as the Committee may recommend and the Board may approve for the particular
sale transaction.
4.2 PURCHASE PRICE. Subject to approval by the Board, the price per share of
Common Stock to be purchased by a Participant under this Plan shall be
determined by the Committee, and may be less than, but shall not greater than
the FMV Per Share at the time of purchase.
4.3 PAYMENT OF PURCHASE PRICE. Payment of the purchase price of Purchased
Stock under this Plan shall be made in full in cash.
ARTICLE V
BONUS STOCK
The Committee may, from time to time and subject to the provisions of the Plan
and approval by the Board, grant shares of Bonus Stock to Employees or
Non-Employee Directors. Such grants of Bonus Stock shall be in consideration of
performance of services by the Participant without additional consideration
except as may be required by the Committee or pursuant to Article XI. Bonus
Stock shall be shares of Common Stock that are not subject to a Restricted
Period under Article VII.
ARTICLE VI
STOCK APPRECIATION RIGHTS AND PHANTOM STOCK
6.1 STOCK APPRECIATION RIGHTS. All Employees and Non-Employee Directors shall
be eligible to receive grants of Stock Appreciation Rights on the following
terms and conditions.
(a) Right to Payment. A Stock Appreciation Right shall confer on the
Participant to whom it is granted a right to receive, upon exercise
thereof, the excess of (A) the FMV Per Share on the date of exercise over
(B) the grant price of the Stock Appreciation Right as determined by the
Committee (the "Spread"). Notwithstanding the foregoing, the Award may
provide, that the Spread covered by a Stock Appreciation Right may not
exceed a specified amount.
(b) Rights Related to Options. A Stock Appreciation Right granted in
connection with an Option shall entitle a Participant, upon exercise
thereof, to surrender that Option or any portion thereof, to the extent
unexercised, and to receive payment of the amount of the Spread computed
pursuant to Subsection 6.1(a) hereof. That Option shall then cease to be
exercisable to the extent surrendered.
(c) Right Without Option. A Stock Appreciation Right granted independent
of an Option shall provide for an exercise price per share of Common Stock
that is not less than one hundred percent (100%) of the FMV Per Share of
Common Stock on the date of grant of the Stock Appreciation Right and shall
be exercisable as set forth in the Award agreement governing the Stock
Appreciation Right and shall not be transferable (other than by will or the
laws of descent and distribution).
(d) Terms. The Award shall set forth the time or times at which and the
circumstances under which a Stock Appreciation Right may be exercised in
whole or in part (including based on
B-11
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
achievement of performance goals and/or future service requirements), the
method of exercise, whether or not a Stock Appreciation Right shall be in
tandem or in combination with any other Award, and any other terms and
conditions of any Stock Appreciation Right.
6.2 PHANTOM STOCK AWARDS. All Employees and Non-Employee Directors shall be
eligible to receive grants of Phantom Stock Awards, which are rights to receive
cash or Common Stock equal to the Fair Market Value of specified number of
shares of Common Stock at the end of a specified deferral period, subject to the
following terms and conditions:
(a) Award and Restrictions. Satisfaction of a Phantom Stock Award shall
occur upon expiration of the deferral period specified for such Phantom
Stock Award or, if permitted by the terms of the Award, as elected by the
Participant. In addition, Phantom Stock Awards shall be subject to such
restrictions (which may include a risk of forfeiture), if any, as the
Committee (with Board approval) may impose, which restrictions may lapse at
the expiration of the deferral period or at earlier specified times
(including based on achievement of performance goals and/or future service
requirements), separately or in combination, installments or otherwise, as
the Committee (with Board approval) may determine. Phantom Stock Awards
shall not be transferable (other than by will or the laws of descent and
distribution).
(b) Forfeiture. Except as otherwise may be set forth in any Award,
employment or other agreement pertaining to a Phantom Stock Award, upon
termination of employment or services during the applicable deferral period
or portion thereof to which forfeiture conditions apply, all Phantom Stock
Awards that are at that time subject to deferral (other than a deferral at
the election of the Participant) shall be forfeited; provided that the
Committee (with Board approval) may provide, by rule or regulation or in
any Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Phantom Stock Awards
shall be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee (with Board approval) may in other
cases waive in whole or in part the forfeiture of Phantom Stock Awards.
(c) Performance Goals. To the extent that any Award granted pursuant to
this Article VI is intended to constitute performance-based compensation
for purposes of Section 162(m) of the Code, the grant or settlement of the
Award shall be subject to the achievement of performance goals determined
and applied in a manner consistent with Section 8.2.
ARTICLE VII
RESTRICTED STOCK
7.1 ELIGIBLE PERSONS. All Employees and Non-Employee Directors shall be
eligible to receive grants of Restricted Stock.
7.2 RESTRICTED PERIOD AND VESTING.
(a) The Restricted Stock shall be subject to such forfeiture restrictions
(including, without limitation, limitations that qualify as a "substantial
risk of forfeiture" within the meaning given to that term under Section 83
of the Code) and restrictions on transfer by the Participant and repurchase
by the Company as shall be set forth in such Award. Prior to the lapse of
such restrictions the Participant shall not be permitted to transfer such
shares. The Company shall have the right to repurchase or recover such
shares for the amount of cash paid therefor, if any, if (i) the Participant
shall terminate Employment from or services to the Company prior to the
lapse of such restrictions under circumstances that do not cause such
restrictions to lapse or (ii) the Restricted Stock is forfeited by the
Participant pursuant to the terms of the Award.
B-12
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
(b) Notwithstanding the foregoing, unless the Award specifically provides
otherwise, all Restricted Stock not otherwise vested shall vest upon (i)
termination of an Employee or removal of a Non-Employee Director without
Cause; (ii) termination or removal of an Employee or Non-Employee Director
for any reason within one (1) year from the effective date of a Change in
Control; or (iii) death or Disability of the Participant.
(c) Each certificate representing Restricted Stock awarded under the Plan
shall be registered in the name of the Participant and, during the
Restricted Period, shall be left in deposit with the Company and a stock
power endorsed in blank until such time as the restrictions on transfer
have lapsed. The grantee of Restricted Stock shall have all the rights of a
stockholder with respect to such shares including the right to vote and the
right to receive dividends or other distributions paid or made with respect
to such shares. Any certificate or certificates representing shares of
Restricted Stock shall bear a legend similar to the following:
The shares represented by this certificate have been issued pursuant to
the terms of the Remington Oil and Gas Corporation 2004 Stock Incentive
Plan (as amended and restated) and may not be sold, pledged,
transferred, assigned or otherwise encumbered in any manner except as is
set forth in the terms of such plan or award dated , 20 .
ARTICLE VIII
PERFORMANCE AWARDS
8.1 PERFORMANCE AWARDS. All Employees and Non-Employee Directors shall be
eligible to receive Performance Awards. Performance Awards may be based on
performance criteria measured over a period of not less than one year and not
more than ten years. The Committee may use such business criteria and other
measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to increase the amounts
payable under any Award subject to performance conditions except as limited
under Section 8.2 in the case of a Performance Award granted to a Covered
Employee.
8.2 PERFORMANCE GOALS. The grant and/or settlement of a Performance Award
shall be contingent upon terms set forth in this Section 8.2.
(a) General. The performance goals for Performance Awards shall consist of
one or more business criteria and a targeted level or levels of performance
with respect to each of such criteria, as specified by the Committee and
approved by the Board. In the case of any Award granted to a Covered
Employee, performance goals shall be designed to be objective and shall
otherwise meet the requirements of Section 162(m) of the Code and
regulations thereunder (including Treasury Regulations sec. 1.162-27 and
successor regulations thereto), including the requirement that the level or
levels of performance are such that the achievement of performance goals is
"substantially uncertain" at the time of grant. Performance Awards shall be
granted and/or settled upon achievement of any one or more such performance
goals. Performance goals may differ among Performance Awards granted to any
one Participant or for Performance Awards granted to different
Participants.
(b) Business Criteria. One or more of the following business criteria for
the Company, on a consolidated basis, and/or for specified subsidiaries,
divisions or business or geographical units of the Company (except with
respect to the total stockholder return and earnings per share criteria),
shall be used in establishing performance goals for Performance Awards
granted to a Participant:
(i) Total shareholder return;
B-13
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
(ii) Return on assets, equity, capital, capital employed, or investment;
(iii) Pre-tax or after-tax profit levels, including: earnings per share;
earnings before interest and taxes; earnings before interest, taxes,
depreciation, and amortization; net operating profits after tax, and net
income;
(iv) Cash flow, free cash flow, and cash flow return on investment;
(v) Operational measures including growth in reserves from the prior
period and percentage or absolute increase in production from the prior
period;
(vi) Levels of cost including finding and development costs, and cash
costs (interest expense, G&A, and LOE) expressed in relationship to
Mcfe/produced during the Performance Period.
Any of the above goals shall be determined on the absolute or relative
basis or as compared to the performance of a published or special index
including, but not limited to, the Standard & Poor's 500 Stock Index or a
group of comparable companies.
(c) Performance Period; Timing for Establishing Performance
Goals. Achievement of performance goals in respect of Performance Awards
shall be measured over a performance period of not less than one year and
not more than ten years, as specified in the Award. Such periods will be
established by the Committee and approved by the Board. Performance goals
in the case of any Award granted to a Participant shall be established not
later than 90 days after the beginning of any performance period applicable
to such Performance Awards, or at such other date as may be required or
permitted for "performance-based compensation" under Section 162(m) of the
Code.
(d) Settlement of Performance Awards; Other Terms. After the end of each
performance period, the Committee shall determine the amount, if any, of
Performance Awards payable to each Participant based upon achievement of
business criteria over a performance period. The Committee may not exercise
discretion to increase any such amount payable in respect of a Performance
Award to a Covered Employee if such Award states that it is intended to
comply with Section 162(m) of the Code. The Award shall specify the
circumstances in which such Performance Awards shall be paid or forfeited
in the event of termination of employment by the Participant prior to the
end of a performance period or settlement of Performance Awards.
(e) Written Determinations. All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award,
and the achievement of performance goals relating to Performance Awards
shall be made in writing in the case of any Award granted to a Participant
and shall be subject to approval by the Board. The Committee may not
delegate any responsibility relating to any Performance Awards to a Covered
Employee.
(f) Status of Performance Awards under Section 162(m) of the Code. It is
the intent of the Company that Performance Awards granted to persons who
are designated by the Committee as likely to be Covered Employees within
the meaning of Section 162(m) of the Code and regulations thereunder
(including Treasury Regulations sec. 1.162-27 and successor regulations
thereto) shall, if so designated by the Committee, constitute
"performance-based compensation" within the meaning of Section 162(m) of
the Code and regulations thereunder. Accordingly, the terms of this Section
8.2 shall be interpreted in a manner consistent with Section 162(m) of the
Code and regulations thereunder. The foregoing notwithstanding, because the
Committee cannot determine with certainty whether a given Participant will
be a Covered Employee with respect to a fiscal year that has not yet been
completed, the term Covered Employee as used herein shall mean only a
person designated by the Committee, at the time of grant of a Performance
Award, who is likely to be a Covered
B-14
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
Employee with respect to that fiscal year. If any provision of the Plan as
in effect on the date of adoption or any agreements relating to Performance
Awards that are designated as intended to comply with Section 162(m) of the
Code does not comply or is inconsistent with the requirements of Section
162(m) of the Code or regulations thereunder, such provision shall be
construed or deemed amended to the extent necessary to conform to such
requirements.
ARTICLE IX
OTHER STOCK OR PERFORMANCE-BASED AWARDS
All Employees and Non-Employee Directors are eligible to receive Other Stock or
Performance-Based Awards, which shall consist of a right which (i) is not an
Award described in any other Article and (ii) is denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or related to,
shares of Common Stock (including, without limitation, securities convertible
into shares of Common Stock) or cash as are deemed by the Committee to be
consistent with the purposes of the Plan. Subject to the terms of the Plan and
approval by the Board, the Committee shall determine the terms and conditions of
any such Other Stock or Performance-Based Award.
ARTICLE X
CERTAIN PROVISIONS APPLICABLE TO ALL AWARDS
10.1 GENERAL. Awards shall be evidenced by a written agreement or other
document and may be granted on the terms and conditions set forth herein. All
Awards and any amendments thereto shall be subject to the approval of the Board.
Any Award or the exercise thereof, shall be subject to such additional terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
(with Board approval) shall determine, including terms requiring forfeiture of
Awards in the event of termination of employment by the Participant and terms
permitting a Participant to make elections relating to his or her Award. The
terms, conditions and/or restrictions contained in an Award may differ from the
terms, conditions and restrictions contained in any other Award. Subject to
approval by the Board, the Committee may amend an Award; provided, however, no
amendment of an Award may, without the consent of the holder of the Award,
adversely affect such person's rights with respect to such Award in any material
respect. Subject to the approval of the Board and the terms of the Plan or
Award, the Committee shall retain the power and discretion to accelerate or
waive, at any time, any term or condition of an Award that is not mandatory
under the Plan; provided, however, that the Committee shall not have a
discretion to accelerate or waive any term or condition of an Award that is
intended to qualify as "performance-based compensation" for purposes of Section
162(m) of the Code if such discretion would cause the Award not to so qualify.
Except in cases in which the Committee is authorized to require other forms of
consideration under the Plan, or to the extent other forms of consideration must
be paid to satisfy the requirements of the Delaware General Corporation Law, no
consideration other than services may be required for the grant of any Award.
10.2 STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Subject to
Section 2.4 of the Plan, Awards granted under the Plan may be granted either
alone or in addition to, in tandem with, or in substitution or exchange for, any
other Award or any award granted under another plan of the Company, any
Affiliate, or any business entity to be acquired by the Company or an Affiliate,
or any other right of a Participant to receive payment from the Company or any
Affiliate. Such additional, tandem and substitute or exchange Awards may be
granted at any time. If an Award is granted in substitution or exchange for
another Award, the Committee shall require the surrender of such other Award for
cancellation in consideration for the grant of the new Award. In addition,
Awards may be granted in lieu of cash compensation, including in lieu of cash
amounts payable under other plans of the Company or any
B-15
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
Affiliate. Any such action contemplated under this Section 10.2 shall be
effective only to the extent that such action will not cause (i) the holder of
the Award to lose the protection of Section 16(b) of the Securities Exchange Act
of 1934 and rules and regulations promulgated thereunder, or (ii) any Award that
is designed to qualify payments thereunder as performance-based compensation as
defined in Section 162(m) of the Code to fail to qualify as such
performance-based compensation.
10.3 TERM OF AWARDS. In no event shall the term of any Award exceed a period
of ten years (or such shorter terms as may be required in respect of an
Incentive Option under Section 422 of the Code).
10.4 FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS. Subject to the terms
of the Plan and any applicable Award agreement, payments to be made by the
Company upon the exercise of an Option or other Award or settlement of an Award
may be made in a single payment or transfer. The settlement of any Award may,
subject to any limitations set forth in the Award agreement, be accelerated and
cash paid in lieu of shares in connection with such settlement. Awards granted
pursuant to Article VI or VIII of the Plan may be payable in shares to the
extent permitted by the terms of the applicable Award agreement. Installment or
deferred payments may be provided for in the Award agreement or permitted with
the consent or at the election of the Participant. Payments may include, without
limitation, provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of amounts in respect
of installment or deferred payments denominated in shares. Any deferral shall
only be allowed as is provided in a separate deferred compensation plan adopted
by the Company. The Plan shall not constitute an "employee benefit plan" for
purposes of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended.
10.5 VESTED AND UNVESTED AWARDS. After the satisfaction of all of the terms
and conditions set by the Committee with respect to an Award of (i) Restricted
Stock, a certificate, without the legend set forth in Section 7.2(a), for the
number of shares that are no longer subject to such restrictions, terms and
conditions shall be delivered to the Employee, (ii) Phantom Stock, to the extent
not paid in cash, a certificate for the number of shares equal to the number of
shares of Phantom Stock earned, and (iii) Stock Appreciation Rights or
Performance Awards, cash and/or a certificate for the number of shares equal in
value to the number of Stock Appreciation Rights or amount of Performance Awards
vested shall be delivered to the Participant. The number of shares of Common
Stock which shall be issuable upon exercise of a Stock Appreciation Right or
earning of a Performance Award shall be determined by dividing (1) by (2) where
(1) is the number of shares of Common Stock as to which the Stock Appreciation
Right is exercised multiplied by the Spread or the amount of Performance Award
that is earned and payable, as applicable, and (2) is the FMV Per Share of
Common Stock on the date of exercise of the Stock Appreciation Right or the date
the Performance Award is earned and payable, as applicable.
10.6 EXEMPTIONS FROM SECTION 16(b) LIABILITY. It is the intent of the Company
that the grant of any Awards to or other transaction by a Participant who is
subject to Section 16 of the Securities Exchange Act of 1934 shall be exempt
from Section 16(b) of the Securities Exchange Act of 1934 pursuant to an
applicable exemption (except for transactions acknowledged by the Participant in
writing to be non-exempt). Accordingly, if any provision of this Plan or any
Award agreement does not comply with the requirements of Rule 16b-3 as then
applicable to any such transaction, such provision shall be construed or deemed
amended to the extent necessary to conform to the applicable requirements of
Rule 16b-3 so that such Participant shall avoid liability under Section 16(b) of
the Securities Exchange Act of 1934.
10.7 SECURITIES REQUIREMENTS. No shares of Common Stock will be issued or
transferred pursuant to an Award unless and until all then-applicable
requirements imposed by federal and state securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction and by any stock
market or exchange upon which the Common Stock may be listed, have been fully
met. As a condition precedent to
B-16
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
the issuance of shares pursuant to the grant or exercise of an Award, the
Company may require the grantee to take any reasonable action to meet such
requirements. The Company shall not be obligated to take any affirmative action
in order to cause the issuance or transfer of shares pursuant to an Award to
comply with any law or regulation described in the second preceding sentence.
10.8 TRANSFERABILITY.
(a) Non-Transferable Awards. Except as otherwise specifically provided in
the Plan, no Award and no right under the Plan, contingent or otherwise,
other than Purchased Stock, Bonus Stock or Restricted Stock as to which
restrictions have lapsed, will be (i) assignable, saleable, or otherwise
transferable by a Participant except by will or by the laws of descent and
distribution or pursuant to a domestic relations order, or (ii) subject to
any encumbrance, pledge or charge of any nature. No transfer by will or by
the laws of descent and distribution shall be effective to bind the Company
unless the Committee shall have been furnished with a copy of the deceased
Participant's will or such other evidence as the Committee may deem
necessary to establish the validity of the transfer. Any attempted transfer
in violation of this Section 10.8(a) shall be void and ineffective for all
purposes.
(b) Ability to Exercise Rights. Except as otherwise specifically provided
under the Plan, only the Participant or his guardian (if the Participant
becomes Disabled), or in the event of his death, his legal representative
or beneficiary, may exercise Options, receive cash payments and deliveries
of shares, or otherwise exercise rights under the Plan. The executor or
administrator of the Participant's estate, or the person or persons to whom
the Participant's rights under any Award will pass by will or the laws of
descent and distribution, shall be deemed to be the Participant's
beneficiary or beneficiaries of the rights of the Participant hereunder and
shall be entitled to exercise such rights as are provided hereunder.
10.9 RIGHTS AS A STOCKHOLDER.
(a) No Stockholder Rights. Except as otherwise provided in Section 7.2(c),
a Participant who has received a grant of an Award or a transferee of such
Participant shall have no rights as a stockholder with respect to any
shares of Common Stock until such person becomes the holder of record.
Except as otherwise provided in Section 7.2(c), no adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities, or
other property) or distributions or other rights for which the record date
is prior to the date such stock certificate is issued.
10.10 LISTING AND REGISTRATION OF SHARES OF COMMON STOCK. The Company, in its
discretion, may postpone the issuance and/or delivery of shares of Common Stock
upon any exercise of an Award until completion of such stock exchange listing,
registration, or other qualification of such shares under any state and/or
federal law, rule or regulation as the Company may consider appropriate, and may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of the shares in compliance with applicable laws, rules and
regulations.
10.11 TERMINATION OF EMPLOYMENT, DEATH AND DISABILITY.
(a) Termination of Employment. Except as otherwise provided in the Award
or in this Section 10.11, if Employment of an Employee or service of a
Non-Employee Director is terminated under circumstances that do not cause
the Participant to become fully vested in the Award, any nonvested Award
granted pursuant to the Plan outstanding at the time of such termination
and all rights thereunder shall wholly and completely terminate and no
further vesting shall occur. Any vested Award shall expire on the earlier
of (A) the expiration date set forth in the Award; or (B) the
B-17
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
expiration of twelve (12) months after the date of termination of
Employment or service in the case of any Award other than an Incentive
Option or three (3) months after the date of termination of Employment in
the case of an Incentive Option; provided, however, that in the event of
death or Disability of a Participant after termination of employment or
service and before the expiration of such Award the expiration of the Award
shall occur twelve months after the date of such death or Disability; and
provided further, however, that in the event of termination of an Employee
or removal of a Director for Cause, such Awards shall expire at 12:01 a.m.
on the date of termination.
(b) Continuation. The Committee, subject to the approval of the Board, may
provide for the continuation of any Award for such period and upon such
terms and conditions as are determined by the Committee and approved by the
Board in the event that a Participant ceases to be an Employee or
Non-Employee Director.
10.12 CHANGE IN CONTROL. Unless otherwise provided in the Award and subject to
approval by the Board, in the event of a Change in Control:
(i) the Committee may accelerate vesting and the time at which all Options
and Stock Appreciation Rights then outstanding may be exercised;
(ii) the Committee may waive all restrictions and conditions of all
Restricted Stock and Phantom Stock then outstanding with the result that
those types of Awards shall be deemed satisfied, and the Restriction Period
or other limitations on payment in full with respect thereto shall be
deemed to have expired, as of the date of the Change in Control or such
other date as may be determined by the Committee; and
(iii) the Committee may determine to amend Performance Awards and Other
Stock or Performance-Based Awards, or substitute new Performance Awards and
Other Stock or Performance-Based Awards in consideration of cancellation of
outstanding Performance Awards and any Other Stock or Performance-Based
Awards, in order to ensure that such Awards shall become fully vested,
deemed earned in full and promptly paid to the Participants as of the date
of the Change in Control or such other date as may be determined by the
Committee, without regard to payment schedules and notwithstanding that the
applicable performance cycle, retention cycle or other restrictions and
conditions shall not have been completed or satisfied.
Notwithstanding the above provisions of this Section 10.12, the Committee shall
not be required to take any action described in the preceding provisions of this
Section 10.12 and any decision made by the Committee not to take some or all of
the actions described in the preceding provisions of this Section 10.12 shall be
final, binding and conclusive with respect to the Company and all other
interested persons.
ARTICLE XI
WITHHOLDING FOR TAXES
Any issuance of Common Stock pursuant to the exercise of an Option or payment of
any other Award under the Plan shall not be made until appropriate arrangements
satisfactory to the Company have been made for the payment of any tax amounts
(federal, state, local or other) that may be required to be withheld or paid by
the Company with respect thereto. Such arrangements may, at the discretion of
the Committee, include allowing the person to tender to the Company shares of
Common Stock owned by the person, or to request the Company to withhold shares
of Common Stock being acquired pursuant to the Award, whether through the
exercise of an Option or as a distribution pursuant to the Award, which have an
aggregate FMV Per Share as of the date of such withholding that is not greater
than the sum of all tax
B-18
REMINGTON OIL AND GAS CORPORATION
2004 STOCK INCENTIVE PLAN-CONTINUED
amounts to be withheld with respect thereto, together with payment of any
remaining portion of such tax amounts in cash or by check payable and acceptable
to the Company.
Notwithstanding the foregoing, if on the date of an event giving rise to a tax
withholding obligation on the part of the Company the person is an officer or
individual subject to Rule 16b-3, such person may direct that such tax
withholding be effectuated by the Company withholding the necessary number of
shares of Common Stock (at the tax rate required by the Code) from such Award
payment or exercise.
ARTICLE XII
MISCELLANEOUS
12.1 NO RIGHTS TO AWARDS. No Participant or other person shall have any claim
to be granted any Award, there is no obligation for uniformity of treatment of
Participants, or holders or beneficiaries of Awards and the terms and conditions
of Awards need not be the same with respect to each recipient.
12.2 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 any 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.
12.3 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 applicable federal law and the laws of the State of Delaware, without
regard to any principles of conflicts of law.
12.4 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 Participant 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, Participant or Award and the remainder of the Plan and
any such Award shall remain in full force and effect.
12.5 OTHER LAWS. The Company may refuse to issue or transfer any shares or
other consideration under an Award if it determines that the issuance of
transfer or such shares or such other consideration might violate any applicable
law.
B-19
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
REMINGTON OIL AND GAS CORPORATION
May 24, 2004
o PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED o
------------------------------------------------------------------------------------------------------------------------------------
PLEASE MARK YOUR
VOTES AS INDICATED
[X] IN THIS EXAMPLE.
FOR WITHHELD
1. Election of NOMINEES: John E. Goble, Jr., 3. In their discretion, the
Directors. [ ] [ ] William E. Greenwood, proxies are authorized
Robert P. Murphy, to vote upon such other
For, except vote withheld from the following David E. Preng, business as may properly
Nominee(s). Thomas W. Rollins, come before the meeting.
Alan C. Shapiro and
-------------------------------------------- James A. Watt
--------------------------------------------
--------------------------------------------
2. Adoption of Remington Oil and Gas Corporation 2004 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Signature(s) Date: 2004
------------------------------------------------- ---------------------------------- -------------------,
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such.
REMINGTON OIL AND GAS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Steven J. Craig and J. Burke Asher, or
either of them, proxies with the full power of substitution, to vote as set
forth herein all shares of common stock of Remington Oil and Gas Corporation
(the "Company") held of record by the undersigned as of March 31, 2004, at the
Annual Meeting of Stockholders of the Company (the "Annual Meeting"), to be held
on May 24, 2004 at 9:00 a.m. central daylight time, and any adjournments or
postponements thereof, hereby revoking any proxies heretofore given.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL
BE VOTED "FOR" THE ELECTION OF THE DIRECTORS NOMINATED BY THE BOARD OF
DIRECTORS, "FOR" THE ADOPTION OF THE REMINGTON OIL AND GAS CORPORATION 2004
STOCK INCENTIVE PLAN, AND IN THE DISCRETION OF THE PROXIES ON ANY OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
You are encouraged to specify your choices by marking the appropriate
box. SEE REVERSE SIDE, but you need not mark any box if you wish to vote in
accordance with the Board of Directors recommendations. The Proxies cannot vote
your shares unless you sign and return this card.
(TO BE SIGNED ON THE REVERSE SIDE)