EOG RESOURCES, INC.
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 3, 2005
----------
To The Shareholders:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of EOG
Resources, Inc. (the "Company") will be held in the La Salle "A" Ballroom of the
Doubletree Hotel at Allen Center, 400 Dallas Street, Houston, Texas, at 2:00
p.m. Houston time on Tuesday, May 3, 2005, for the following purposes:
1. To elect eight directors of the Company to hold office until the
next annual meeting of shareholders and until their respective
successors are duly elected and qualified;
2. To ratify the appointment by the Audit Committee of the Board of
Directors of Deloitte & Touche LLP, independent public accountants, as
auditors for the Company for the year ending December 31, 2005; and
3. To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common
Stock.
Holders of record of Common Stock of the Company at the close of
business on March 7, 2005, will be entitled to notice of and to vote at the
meeting or any adjournments thereof.
Shareholders who do not expect to attend the meeting are encouraged to
vote via the Internet, vote by phone or vote by returning a signed proxy card.
By Order of the Board of Directors,
PATRICIA L. EDWARDS
Vice President, Human Resources,
Administration & Corporate Secretary
Houston, Texas
March 30, 2005
EOG RESOURCES, INC.
PROXY STATEMENT
The enclosed form of proxy is solicited by the Board of Directors of
EOG Resources, Inc. (the "Company" or "EOG") to be used at the annual meeting of
shareholders to be held in the La Salle "A" Ballroom of the Doubletree Hotel at
Allen Center, 400 Dallas Street, Houston, Texas, at 2:00 p.m. Houston time on
Tuesday, May 3, 2005 (the "Annual Meeting"). The mailing address of the
principal executive offices of the Company is 333 Clay Street, Suite 4200,
Houston, Texas 77002. This proxy statement and the related proxy are to be first
sent or given to the shareholders of the Company on approximately March 30,
2005. Any shareholder giving a proxy may revoke it at any time provided written
notice of such revocation is received by the Vice President, Human Resources,
Administration & Corporate Secretary of the Company before such proxy is voted;
otherwise, if received in time, properly completed proxies will be voted at the
Annual Meeting in accordance with the instructions specified thereon.
Shareholders attending the Annual Meeting may revoke their proxies and vote in
person.
Holders of record at the close of business on March 7, 2005, of Common
Stock of the Company, par value $.01 per share ("Common Stock"), will be
entitled to one vote per share on all matters submitted to the meeting. On March
7, 2005, the record date, there were outstanding 238,981,689 shares of Common
Stock. There are no other voting securities outstanding.
The Company's annual report to shareholders for the year ended
December 31, 2004, is being mailed herewith to all shareholders entitled to vote
at the Annual Meeting. However, the annual report to shareholders does not
constitute a part of the proxy soliciting materials.
ITEM 1.
ELECTION OF DIRECTORS
At the Annual Meeting, eight directors are to be elected to hold
office until the next succeeding annual meeting of shareholders and until their
respective successors have been elected and qualified. All of the nominees are
currently directors of the Company. Proxies cannot be voted for a greater number
of persons than the number of nominees named on the enclosed form of proxy. A
majority of the votes cast in person or by proxy by the holders of Common Stock
is required to elect a director. Accordingly, under Delaware law, abstentions
and broker non-votes (which occur if a broker or other nominee does not have
discretionary authority and has not received instructions with respect to a
particular item) would not have the same effect as a vote withheld with respect
to a particular director. Shareholders may not cumulate their votes in the
election of directors.
It is the intention of the persons named in the enclosed proxy to vote
such proxy "FOR" the election of the nominees named herein. Should any nominee
become unavailable for election, discretionary authority is conferred to vote
for a substitute. The following information regarding the nominees, their
principal occupations, employment history and directorships in certain companies
is as reported by the respective nominees.
GEORGE A. ALCORN, 72
Director since 2000
Mr. Alcorn has served as President of Alcorn Exploration,
Inc. for more than the past five years. He is a past
chairman of the Independent Petroleum Association of America
and a founding member and past chairman of the Natural Gas
Council.
CHARLES R. CRISP, 57
Director since 2002
Mr. Crisp's principal occupation is investments. Mr. Crisp
was President and Chief Executive Officer and a Director of
Coral Energy, LLC, a subsidiary of Shell Oil Company from
1999 until his retirement in November 2000, and President
and Chief Operating Officer and a Director from January 1998
through February 1999. Mr. Crisp is also a director of AGL
Resources Inc., an energy services holding company.
MARK G. PAPA, 58
Director since 1998
Mr. Papa was elected Chairman of the Board and Chief
Executive Officer ("CEO") of the Company in August 1999,
President and CEO and Director in September 1998, President
and Chief Operating Officer in September 1997, President in
December 1996 and was President-North America Operations
from February 1994 to September 1998. Mr. Papa joined Belco
Petroleum Corporation, a predecessor of the Company, in
1981. Mr. Papa is also a director of Oil States
International, Inc., an oilfield services company, a
director of Magellan Midstream Partners LP, a pipeline and
terminal company, and Chairman of the U.S. Oil and Gas
Association.
EDMUND P. SEGNER, III, 51
Director since 1999
Mr. Segner became President and Chief of Staff and Director
of the Company in August 1999. He became Vice Chairman and
Chief of Staff in September 1997. He was also a Director of
the Company from January 1997 to October 1997. Mr. Segner is
the Company's principal financial officer.
WILLIAM D. STEVENS, 70
Director since 2004
Mr. Stevens is currently retired. He served as President and
Chief Operating Officer of Mitchell Energy and Development
Corporation from 1994 until his retirement in 2002, having
also served as a Board member since 1992.
H. LEIGHTON STEWARD, 70
Director since 2004
Mr. Steward is author-partner of Sugar Busters, LLC. He
retired from Burlington Resources in 2000, where he had
served as Vice Chairman since 1997.
DONALD F. TEXTOR, 58
Director since 2001
Mr. Textor's principal occupation is Portfolio Manager of
the Dorset Energy Fund and a Partner of Knott Partners LLC.
Previously, Mr. Textor was a partner and managing director
at Goldman Sachs until his retirement in March 2001.
FRANK G. WISNER, 66
Director since 1997
Mr. Wisner has served as Vice Chairman of External Affairs
of American International Group Inc. since 1997, following
his retirement as U.S. Ambassador to India. Mr. Wisner is
also a director of Ethan Allen Interiors Inc.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ON DECEMBER 31, 2004
The Company knows of no one who beneficially owns in excess of 5% of
the Company's Common Stock except as set forth in the table below:
NAME AND ADDRESS
OF BENEFICIAL OWNER NUMBER OF SHARES (1) PERCENT OF CLASS
--------------------------------------- -------------------- ----------------
Davis Selected Advisors, L.P. (2) 12,070,673 10.15%
609 Fifth Ave
New York, NY 10017
Capital Research & Management Co. (3) 10,554,000 8.87%
333 South Hope Street
Los Angeles, CA 90071
(1) Number of shares presented as of December 31, 2004 is not adjusted for
the two-for-one stock split effective March 1, 2005.
(2) In its Schedule 13G filed March 3, 2005 with respect to its securities
as of December 31, 2004, Davis Selected Advisors, L.P. states that it
has sole voting power as to 12,070,673 shares, shared voting power as
to no shares, sole dispositive power with respect to 12,070,673 shares
and shared dispositive power with respect to no shares.
(3) In its Schedule 13G filed February 9, 2005 with respect to its
securities as of December 31, 2004, Capital Research & Management Co.
states that it has sole voting power as to no shares, shared voting
power as to no shares, sole dispositive power with respect to
10,554,000 shares and shared dispositive power with respect to no
shares.
SECURITY OWNERSHIP OF THE BOARD OF DIRECTORS AND MANAGEMENT ON MARCH 2, 2005
SHARES OPTIONS
BENEFICIALLY EXERCISABLE PHANTOM TOTAL
TITLE OF CLASS NAME OWNED (1) BY 5-1-05 SHARES (2) OWNERSHIP (3)
---------------------- ------------------------------------- ------------- ------------- ------------- -------------
EOG Resources, Inc. George A. Alcorn 5,300 0 0 5,300
Common Stock Charles R. Crisp 6,000 21,000 1,152 28,152
Barry Hunsaker, Jr. 47,868 112,000 15,762 175,630
Loren M. Leiker 116,507 88,000 27,550 232,057
Mark G. Papa 540,224 1,180,130 188,174 1,908,528
Edmund P. Segner, III 368,871 0 42,335 411,206
William D. Stevens 1,600 0 0 1,600
H. Leighton Steward 30,588 0 1,660 32,248
Donald F. Textor 20,000 49,000 10,102 79,102
Gary L. Thomas 208,533 312,000 27,550 548,083
Frank G. Wisner 0 96,000 10,199 106,199
All directors and executive
officers as a Group (12 in number) 1,362,141 1,858,130 330,072 3,550,343
(1) Includes shares for which the person directly or indirectly has sole
or shared voting and investment power, shares held under the EOG
Resources, Inc. Savings Plan (the "Savings Plan") for which the
participant has sole voting and investment power, and restricted
shares held under the EOG Resources, Inc. 1992 Stock Plan (the "1992
Stock Plan") for which the participant has sole voting power and no
investment power until such shares vest in accordance with plan
provisions.
(2) Includes restricted stock units held under the 1992 Stock Plan for
which the participant has no voting or investment power until such
units vest and are released as shares in accordance with plan
provisions. Also includes shares held in the Phantom Stock Account of
the EOG Resources, Inc. 1996 Deferral Plan (the "1996 Deferral Plan")
for which the participant has a vested right, but has no voting or
investment power until such shares are released in accordance with
plan provisions and the participant's deferral election.
(3) No director or officer of the Company owns or has the right to acquire
more than 1% of the outstanding Common Stock.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held six regularly scheduled meetings during
the year ended December 31, 2004. Each director attended at least 75% of the
total number of meetings of the Board of Directors and the committees on which
the director served, except for Mr. Steward who attended 73% because of a prior
commitment that conflicted with the 2004 meeting schedule that was established
before he joined the Board of Directors in July 2004. Each director attended the
2004 Annual Meeting of Shareholders other than Mr. Stevens and Mr. Steward who
were elected to the Board of Directors in July 2004.
The Board of Directors has determined that six of the Company's
directors, Messrs. Alcorn, Crisp, Stevens, Steward, Textor and Wisner, who
together constitute three-fourths of its directors, meet the criteria for
independence required by the New York Stock Exchange ("NYSE") and the criteria
for independence required by the Company's by-laws. Under the Company's
Corporate Governance Guidelines, no director may serve on more than three other
public company boards.
The Company has adopted a Code of Ethics for Senior Financial Officers
and a Code of Business Conduct and Ethics for all directors, officers,
employees, agents and representatives of the Company, as well as Corporate
Governance Guidelines. Links to these documents, including printable versions,
are available on the EOG Resources, Inc. website at
www.eogresources.com/about/corpgov.html. The documents are also available in
print upon request. The Board of Directors has a process in place for
shareholders to send communications to the Board. Shareholders of the Company
shall submit such communications in writing to the Secretary of the Company, who
upon receipt of any communication other than one that is clearly marked
"Confidential" will note the date the communication was received in a log
established for that purpose, open the Board communication, make a copy of it
for the Company's files, and promptly forward the communication to the directors
to whom it is directed. Upon receipt of any communication that is clearly marked
"Confidential", the Secretary of the Company will not open the communication,
but will note the date the communication was received in a log established for
that purpose, and promptly forward the communication to the directors to whom it
is addressed. Further information regarding this process can be found on the
Company's website at the link noted above.
The Board of Directors uses working committees with functional
responsibility in the more complex recurring areas where disinterested oversight
is required. The charters for each of the committees identified below, including
printable versions, are available at the website noted above. The charters are
also available in print upon request.
The Audit Committee, which is composed exclusively of independent
directors, is the communication link between the Board of Directors and the
independent auditors of the Company. The Board of Directors has determined that
the Company currently does not have an Audit Committee Financial Expert serving
on the Audit Committee. The Board of Directors has selected the members of the
Audit Committee based on the Board's determination that they are qualified to
monitor the performance of management and the independent auditors and to
monitor the disclosures of the Company so that they fairly present the Company's
financial condition and results of operation. In addition, the Audit Committee
has the ability on its own and at the Company's expense to retain independent
accountants or other consultants whenever it deems appropriate. The Board of
Directors believes that this is equivalent to having an Audit Committee
Financial Expert on the Audit Committee. The Board of Directors believes it is
desirable for the Company to nominate as a director a person who would qualify
as an Audit Committee Financial Expert, but only if that person also has the
other experience, attributes and qualifications that the Company is then seeking
for new members of the Board of Directors. Accordingly, the Nominating Committee
has been directed to include in the information that it seeks from potential
nominees to the Board of Directors whether that person has the knowledge,
background and experience to qualify as an Audit Committee Financial Expert and
to consider such qualifications when proposing nominees for the Board of
Directors. The Audit Committee has the sole authority to appoint independent
public accountants as auditors for the Company and reviews, as deemed
appropriate, the scope of the audit, the accounting policies and reporting
practices, the system of internal controls, compliance with policies regarding
business conduct and other matters. The Audit Committee met seven times during
the year ended December 31, 2004, and is currently composed of Messrs. Textor
(Chairman), Alcorn, Crisp, Stevens, Steward and Wisner.
The Compensation Committee, which is composed exclusively of
independent directors, is responsible for administration of the Company stock
plans and approval of compensation arrangements of the Company's executive
officers. The Compensation Committee met seven times during the year ended
December 31, 2004, and is currently composed of Messrs. Alcorn (Chairman),
Crisp, Stevens, Steward, Textor and Wisner.
The Nominating Committee, which is composed exclusively of independent
directors, is responsible for proposing qualified candidates to fill vacancies
on the Board of Directors without regard to race, sex, age, religion or physical
disability. Nominees for director should possess personal and professional
integrity, have good business judgment, and have relevant experience and skills.
The Nominating Committee met three times during the year ended December 31,
2004. The Nominating Committee will consider nominees recommended by
shareholders in accordance with the procedures outlined on [page 18] of this
Proxy Statement. The Nominating Committee is currently composed of Messrs. Crisp
(Chairman), Alcorn, Stevens, Steward, Textor and Wisner.
The Corporate Governance Committee is responsible for developing and
recommending corporate governance principles applicable to the Company and for
oversight of the self-evaluation of the Board of Directors. The Corporate
Governance Committee met three times during the year ended December 31, 2004,
and is currently composed of Messrs. Wisner (Chairman), Alcorn, Crisp, Stevens,
Steward and Textor.
The non-management directors held four executive sessions in 2004. Mr.
Alcorn was appointed by the non-management directors as the presiding director
for these meetings. Mr. Steward has been appointed by the non-management
directors as the presiding director for their executive sessions in 2005.
REPORT OF THE AUDIT COMMITTEE
In connection with the Company's December 31, 2004 financial
statements, the Audit Committee (1) reviewed and discussed the audited financial
statements with management; (2) discussed with the independent auditors the
matters required by Statement on Auditing Standards No. 61, as amended; and (3)
received the written disclosures and the letter from the independent auditors
required by Independence Standards Board Standard No. 1, discussed with the
independent auditors the independent auditors' independence, and considered
whether the provision of non-audit services by the Company's principal auditors
is compatible with maintaining auditor independence. Based upon these reviews
and discussions, the Audit Committee has recommended to the Board of Directors,
and the Board of Directors has approved, that the Company's audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2004 for filing with the Securities and Exchange
Commission.
AUDIT COMMITTEE
Donald F. Textor, Chairman
George A. Alcorn
Charles R. Crisp
William D. Stevens
H. Leighton Steward
Frank G. Wisner
REPORT FROM THE COMPENSATION COMMITTEE REGARDING
EXECUTIVE COMPENSATION
Compensation for the Company's executive officers is administered by
the Compensation Committee of the Board of Directors (the "Committee"). It is
the responsibility of the Committee to develop compensation philosophy,
authorize salary increases, annual bonuses and long-term incentive grants for
executive officers, and approve other incentive programs, including stock-based
programs, consistent with the stated philosophy.
The Committee believes that appropriately balanced compensation
components contribute to the success of the Company and that the best
compensation philosophy is to put a substantial portion of the total
compensation package at risk, tied to both the financial results achieved by the
Company and the performance of the Common Stock of the Company. The Committee
supports a practice of paying base salaries that approximate the median of the
competitive market, and bonuses and long term incentives which deliver above
average compensation if financial results and/or shareholder returns exceed the
average achieved by peer companies. On an annual basis, the Committee reviews a
tally sheet setting forth base salary, annual bonus, long-term incentives
awarded, perquisites and other benefits for the Chief Executive Officer and each
Named Executive Officer as compared to the industry peer companies included in
the "Comparative Stock Performance" section, based on data reported in current
proxy statements. Based on this review, the Committee finds the total
compensation of the Chief Executive Officer and other Named Executive Officers
to be reasonable and not excessive.
The Committee also believes that it is in the best interest of
shareholders for executive officers to maintain a certain level of ownership in
the Company. Therefore, stock ownership guidelines have been established ranging
from one times base salary for Vice Presidents up to five times base salary for
the Chief Executive Officer. Each executive officer currently meets the stated
ownership guideline.
Annual Bonuses. Annual bonuses are paid to executive officers under
the Company's Executive Officer Annual Bonus Plan, which was approved by
shareholders in 2001. The performance goal necessary for payment of bonuses is
the achievement of positive Net Income Available to Common, excluding
nonrecurring or extraordinary items, as reported in the Company's year-end
earnings release. This performance goal was met in 2004. The maximum individual
bonus for any calendar year is $2,000,000. The Committee may reduce the bonus
payable to an executive officer below the maximum amount based on objective or
subjective criteria in its sole discretion. The criteria currently considered by
the Committee are the reinvestment rate of return of the capital expenditure
program, production volume growth, reserve replacement, finding cost of adding
new reserves, stock price performance relative to peer companies and the level
of cash flow and net income. These goals are designed to address both current
financial performance and the long-term development of the Company. No specific
formula is used for weighting these performance criteria. For bonuses paid in
2005 for 2004 performance, for retention purposes, the Committee approved
delivery of 20% of the bonuses paid to executive officers, other than the Chief
Executive Officer, in restricted stock units. The restricted stock units have a
current value ranging from two to three times the amount of cash withheld, and
will vest after five years of additional service with the Company.
Stock Plan. The Company's 1992 Stock Plan constitutes the long-term
incentive component for executive officers of the Company. Under the 1992 Stock
Plan, the Committee is authorized to grant awards of stock options, stock
appreciation rights, restricted stock and restricted stock units. Historically,
stock options have been granted to executive officers on an annual basis. Such
stock options become vested over four years, are exercisable for ten years and
have an option price equal to the fair market value of Common Stock on the date
of grant. In 2004, the Committee added a feature to stock options that limits
the potential gain that can be realized by requiring vested options to be
exercised if the market price reaches 200% of the grant price for five
consecutive trading days. If such options are not exercised upon attainment of
the cap, they will be forfeited. Prospectively, the Committee may utilize the
other types of awards available under the 1992 Stock Plan in order to 1) balance
the long-term objectives of market competitiveness, motivation, and retention,
2) maximize the perceived compensation value to the executive, and 3) minimize
the actual cost to the Company, all in the best interest of shareholders.
Chief Executive Officer Compensation. Under the provisions of Mr.
Papa's employment agreement with the Company, which was amended on June 20,
2001, Mr. Papa's annual salary will be no less than $650,000. In August 2004,
based on competitive market data, Mr. Papa's salary was increased to $940,000.
Also in August 2004, Mr. Papa was granted 135,000 stock options that were priced
at the fair market value of Common Stock on the date of grant, consistent with
the stated long-term incentive objectives. The options vest over four years, are
exercisable for ten years, and have a 200% exercise price cap, as described
above. In February 2005, Mr. Papa was awarded a bonus for 2004 performance under
the Company's Executive Officer Annual Bonus Plan. The bonus consisted of a cash
component of $846,000 and, for retention purposes, [xx,xxx] restricted stock
units that vest after five years of additional service with the Company. In
determining the level of Mr. Papa's bonus, the Committee considered the criteria
previously discussed.
Compliance with Internal Revenue Code Section 162(m). Section 162(m)
of the Internal Revenue Code, as amended, generally disallows a tax deduction to
public companies for compensation over $1 million paid to the Chief Executive
Officer and the four other most highly compensated executive officers of a
company, as reported in that company's proxy statement. Qualifying
performance-based compensation is not subject to the deduction limit if certain
requirements are met. Historically, the Company has structured the key component
of its long-term incentives in the form of stock option grants that comply with
the statute. The Company's Executive Officer Annual Bonus Plan also complies
with the statute. The Committee is committed to preserving the deductibility of
compensation under Section 162(m) whenever practicable, but does grant awards
that are non-deductible, such as restricted stock and restricted stock units,
when it feels such grants are in the best interest of the Company and its
shareholders. In 2004, $165,860 of Mr. Papa's compensation was not deductible.
COMPENSATION COMMITTEE
George A. Alcorn (Chairman)
Charles R. Crisp
William D. Stevens
H. Leighton Steward
Donald F. Textor
Frank G. Wisner
COMPARATIVE STOCK PERFORMANCE
The performance graph shown below was prepared by Value Line, Inc.,
for use in this proxy statement. As required by applicable rules of the
Securities and Exchange Commission (the "SEC"), the graph was prepared based
upon the following assumptions:
1. $100 was invested on December 31, 1999 in Common Stock of EOG, the
Standard & Poors 500 and a peer group of independent exploration and production
companies (the "Peer Group").
2. The investments in the Peer Group are weighted based on the market
capitalization of each individual company within the Peer Group at the beginning
of each year.
3. Dividends are reinvested on the ex-dividend dates.
The companies that comprise the Peer Group are as follows: Anadarko
Petroleum Corporation, Apache Corporation, Burlington Resources Inc., Noble
Energy Inc., Ocean Energy, Inc. (acquired by Devon Energy Corporation in April
2003), Pioneer Natural Resources Company, Santa Fe Snyder Corp. (acquired by
Devon Energy Corporation in August 2000), Union Pacific Resources Company
(acquired by Anadarko Petroleum Corporation in July 2000), and Vastar Resources,
Inc. (acquired by BP Amoco PLC in September 2000).
COMPARATIVE TOTAL RETURNS
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
EOG RESOURCES INC., STANDARD & Poors 500 and Peer Group
(PERFORMANCE RESULTS DECEMBER 31, 1999 THROUGH DECEMBER 31, 2004)
[CHART APPEARS HERE]
1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------
EOG Resources, Inc. 100.00 317.92 228.55 234.31 272.24 422.54
Standard & Poors 500 100.00 89.86 78.14 59.88 75.68 82.49
Peer Group 100.00 126.49 103.01 105.64 133.57 179.57
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR COMPENSATION
Each director who was not an employee of the Company or its affiliates
("nonemployee director") received director fees of $15,000 for each of the first
two quarters in 2004, based on an annual fee of $60,000, other than Mr. Stevens
and Mr. Steward who were elected to the Board of Directors in July 2004. In the
third quarter of 2004, the annual fee was increased to $75,000, and each
nonemployee director received director fees of $18,750 for each of the last two
quarters of 2004 other than Edward Randall, III, who retired in May 2004. Total
director fees earned in 2004 were $375,000.
Nonemployee directors can defer fees to a later specified date by
participating in the 1996 Deferral Plan. Under the 1996 Deferral Plan, deferrals
are invested into either a Flexible Deferral Account in which deferrals are
treated as if they had been invested into various investment funds or into a
Phantom Stock Account in which deferrals are treated as if they had purchased
Company Common Stock including reinvestment of dividends. In 2004 six of the
nonemployee directors, including Mr. Randall prior to his retirement,
participated in the 1996 Deferral Plan.
Nonemployee directors also participate in the Amended and Restated EOG
Resources, Inc. 1993 Nonemployee Directors Stock Option Plan (the "Directors
Stock Option Plan"), which was approved by Company shareholders at the 2002
annual meeting. Under the terms of the Directors Stock Option Plan, each
nonemployee director receives on the date of each annual meeting options to
purchase 7,000 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the date of grant. In addition, each
nonemployee director who is elected or appointed to the Board of Directors for
the first time after an annual meeting is granted on the date of such election
or appointment, options to purchase 7,000 shares of Common Stock at an exercise
price equal to the fair market value of the Common Stock on the date of grant.
Options granted under the Directors Stock Option Plan vest 50% after one year
and 100% after two years of service as a director following the date of grant.
All options expire ten years from the date of grant. During 2004, Messrs.
Alcorn, Crisp, Textor and Wisner were each granted 7,000 options (14,000
post-split) at an exercise price of $54.02 per share ($27.01 post-split) and
Messrs. Stevens and Steward were each granted 7,000 options (14,000 post-split)
at an exercise price of $60.81 per share ($30.405 post-split).
EXECUTIVE COMPENSATION
The following table summarizes certain information regarding
compensation paid or accrued during each of the last three fiscal years to the
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company (the "Named Officers"):
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- -----------------------------------
OTHER RESTRICTED SECURITIES ALL OTHER
ANNUAL STOCK UNDERLYING LTIP COMPENSATION
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) AWARDS (2) OPTIONS (3) PAYOUTS (4)
------------------------- ------ --------- --------- ---------------- ----------- ----------- ------- ------------
Mark G. Papa 2004 $ 905,538 $ 846,000 $ 41,242 $ 825,034 270,000 $ 0 $ 234,831
Chairman and Chief 2003 $ 813,846 $ 550,000 $ 23,807 $ 5,443,038 300,000 $ 0 $ 203,077
Executive Officer 2002 $ 733,654 $ 0(5) $ 20,827 $ 883,678 514,130 $ 0 $ 204,106
Edmund P. Segner, III 2004 $ 478,854 $ 516,000 $ 17,356 $ 220,038 90,000 $ 0 $ 121,328
President and 2003 $ 468,854 $ 440,000 $ 13,406 $ 559,009 100,000 $ 0 $ 113,078
Chief of Staff 2002 $ 459,239 $ 380,000 $ 12,986 $ 157,529 120,000 $ 0 $ 116,078
Loren M. Leiker 2004 $ 428,077 $ 480,600 $ 19,440 $ 220,038 90,000 $ 0 $ 113,712
Executive Vice President, 2003 $ 382,692 $ 440,000 $ 11,955 $ 524,517 100,000 $ 0 $ 89,804
Exploration & Development 2002 $ 340,385 $ 288,000 $ 9,542 $ 112,525 120,000 $ 0 $ 84,462
Gary L. Thomas 2004 $ 428,077 $ 480,600 $ 13,092 $ 220,038 90,000 $ 0 $ 113,712
Executive Vice President, 2003 $ 382,692 $ 440,000 $ 10,973 $ 524,517 100,000 $ 0 $ 89,804
Operations 2002 $ 340,385 $ 288,000 $ 9,812 $ 112,525 120,000 $ 0 $ 84,462
Barry Hunsaker, Jr. 2004 $ 354,462 $ 263,520 $ 15,019 $ 110,019 40,000 $ 0 $ 77,919
Senior Vice President 2003 $ 326,154 $ 220,000 $ 10,847 $ 277,273 50,000 $ 0 $ 58,500
and General Counsel 2002 $ 305,577 $ 184,000 $ 9,059 $ 66,031 50,000 $ 0 $ 47,537
(1) Other Annual Compensation includes cash perquisite allowances and
reimbursement for payment of taxes resulting from Company requested
spouse travel. No Named Officer had "Perquisites and Other Personal
Benefits" with a value greater than the lesser of $50,000 or 10% of
reported salary and bonus. The Company maintains the 1996 Deferral
Plan under which payment of base salary and annual bonus may be
deferred to a later specified date. Since the 1996 Deferral Plan does
not credit above-market or preferential earnings, no earnings have
been reported as Other Annual Compensation.
(2) Following is the aggregate number of shares of unreleased restricted
stock and restricted stock units and their value as of December 31,
2004 (adjusted for the two-for-one stock split effective March 1,
2005), for each of the Named Officers: Mr. Papa, 498,868 shares/units
valued at $17,799,610; Mr. Segner, 115,542 shares/units valued at
$4,122,539; Mr. Leiker, 107,550 shares/units valued at $3,837,384; Mr.
Thomas, 107,550 shares/units valued at $3,837,384; and Mr. Hunsaker,
55,762 shares/units valued at $1,989,588. Dividend equivalents accrue
from the date of grant and become payable effective with the vesting
date of the shares. All restricted stock and restricted stock units
granted to the other Named Officers vest five years from date of
grant. Of Mr. Papa's restricted stock and restricted stock units,
86,330 vest in one-third increments after three, four and five years,
and the remainder vest five years from date of grant. Upon the date a
press release is issued announcing a pending Shareholder vote, tender
offer, or other transaction which, if approved or consummated, would
constitute a change of control of the Company as defined in the
Company's Change of Control Severance Plan, all restrictions placed on
each share of non-vested restricted stock or restricted stock unit
shall lapse and such shares will become fully vested released
securities.
(3) The number of options granted is adjusted for the two-for-one stock
split effective March 1, 2005.
(4) Includes matching contributions under the Savings Plan, Company
contributions on behalf of each employee to the Money Purchase Pension
Plan and Company contributions on behalf of each employee to the 1996
Deferral Plan.
(5) Mr. Papa's 2002 bonus did not have a cash component.
STOCK OPTION GRANTS DURING 2004
The following table sets forth information with respect to grants of
stock options to the Named Officers reflected in the Summary Compensation Table.
No stock appreciation rights ("SARs") were granted during 2004 and none are
outstanding.
2004 GRANTS
-----------------------------------------------------------------------------
PERCENT OF
TOTAL
OPTIONS/ OPTIONS AVERAGE GRANT
NAME/GROUP SARS GRANTED TO OPTION DATE
-------------------------- GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
NAMED OFFICERS (#)(1)(2)(3) FISCAL YEAR PER SHARE (1) DATE VALUE (4)
-------------------------- ------------- ------------- ------------- ------------- -------------
Mark G. Papa 270,000 10.7% $ 32.45 08/03/14 $ 2,955,150
Edmund P. Segner, III 90,000 3.6% $ 32.45 08/03/14 $ 985,050
Loren M. Leiker 90,000 3.6% $ 32.45 08/03/14 $ 985,050
Gary L. Thomas 90,000 3.6% $ 32.45 08/03/14 $ 985,050
Barry Hunsaker, Jr. 40,000 1.6% $ 32.45 08/03/14 $ 437,800
(1) The number of options granted and average option price per share are
adjusted for the two-for-one stock split effective March 1, 2005.
(2) Upon the date a press release is issued announcing a pending
shareholder vote, tender offer, or other transaction which, if
approved or consummated, would constitute a change of control of the
Company as defined in the Company's Change of Control Severance Plan,
stock options shall vest and be fully exercisable.
(3) Stock options awarded on August 3, 2004 vest at the cumulative rate of
25% per year, commencing on the first anniversary of the date of
grant.
(4) Beginning in August 2004, EOG's stock options contain a feature that
limits the potential gain that can be realized by requiring vested
options to be exercised if the market price reaches 200% of the grant
price for five consecutive trading days ("capped option"). The grant
date present value of each capped option grant is estimated using a
Monte Carlo Simulation Model assuming a dividend yield of 0.4%,
expected volatility of 31%, risk-free interest rate of 4.24% and a
weighted average expected life of 4.83 years. Based on the Monte Carlo
Simulation Model, using the above assumptions, the value of the
options granted on August 3, 2004 is $10.945 per share (adjusted for
the two-for-one stock split effective March 1, 2005). The actual
value, if any, an optionee may realize will depend on the excess of
the Company's stock price over the exercise price on the date the
option is exercised.
AGGREGATED STOCK OPTION/SAR EXERCISES DURING 2004 AND STOCK OPTION/SAR VALUES AS
OF DECEMBER 31, 2004
The following table sets forth information with respect to the Named
Officers concerning the exercise of options during the last fiscal year and
unexercised options and SARs held as of the end of the fiscal year:
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS OPTIONS/SARS
SHARES AT DECEMBER 31, 2004 (1)(2) AT DECEMBER 31, 2004 (1)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE (2) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------- ------------- ------------- ------------- ------------- ------------- -------------
Mark G. Papa 420,000 $ 8,259,510 1,280,130 654,000 $ 25,896,790 $ 7,580,550
Edmund P. Segner, III 446,924 $ 6,284,475 0 228,000 $ 0 $ 2,706,900
Loren M. Leiker 185,000 $ 3,538,074 158,000 218,000 $ 2,832,630 $ 2,526,850
Gary L. Thomas 280,000 $ 6,578,531 392,000 218,000 $ 8,242,675 $ 2,526,850
Barry Hunsaker, Jr. 113,440 $ 2,208,312 112,000 98,000 $ 2,043,473 $ 1,135,840
(1) There are no SARs applicable to the Named Officers.
(2) The number of shares acquired on exercise and the unexercised options
at December 31, 2004 are adjusted for the two-for-one stock split
effective March 1, 2005.
RETIREMENT AND SUPPLEMENTAL BENEFIT PLANS
The Company maintains a Savings Plan, that qualifies under Section
401(a) of the Internal Revenue Code, as amended, under which the Company
currently matches 100% of employees' pre-tax contributions up to 6% of annual
base salary, subject to statutory limits. The Company also maintains a Money
Purchase Pension Plan, that qualifies under Section 401(a) of the Internal
Revenue Code, as amended, under which the Company contributes from 3% to 9% of
an employee's annual base salary and bonus, depending on the employee's age and
years of service with the Company, subject to statutory limits. The contribution
percentage for each of the Named Officers is 9%. In addition, the Company may
make contributions into the 1996 Deferral Plan in the event of a reduction in an
employee's benefits under the Savings Plan or Money Purchase Pension Plan due to
either statutory and/or plan earnings limits or the employee's deferral of
salary into the 1996 Deferral Plan.
SEVERANCE PLANS/CHANGE OF CONTROL PROVISIONS
The Company maintains a Severance Plan that provides benefits to
employees who are terminated for failing to meet performance objectives or
standards, or who are terminated due to reorganization or economic factors. The
amount of benefits payable for performance related terminations is based on
length of service and may not exceed six weeks of pay. For those terminated as
the result of reorganization or economic circumstances, the benefit is based on
length of service and amount of pay up to a maximum payment of 26 weeks of base
pay. In each case, if the employee signs a Waiver and Release of Claims
Agreement, the severance pay benefits are doubled. Under no circumstances will
the total severance pay benefit from the plan exceed 52 weeks of pay.
Under the Company's Change of Control Severance Plan, in the event of
a change of control (as defined in the Change of Control Severance Plan) of the
Company, any eligible employee who is involuntarily terminated or terminates for
good reason, both as defined in the Change of Control Severance Plan, within two
years following the change of control will receive severance benefits equal to
two weeks of base pay multiplied by the number of full or partial years of
service, plus one month of base pay for each $10,000 (or portion of $10,000)
included in the employee's annual base pay, plus one month of base pay for each
5% of annual incentive award opportunity under any approved plan. The minimum an
employee can receive is six months of base pay. The maximum an employee can
receive is the lesser of 2.99 times the employee's average W-2 earnings over the
past five years or three times the sum of the employee's annual base pay and
100% of the employee's annual incentive award opportunity under any approved
plan. In addition, the Change of Control Severance Plan provides reimbursement
for any excise tax, interest and penalties incurred if payments or benefits
received due to a change of control create an excise tax liability under Section
280G of the Internal Revenue Code.
Officers of the Company have the same change of control severance
benefits. However, in 2001, the Named Officers entered into Change of Control
Agreements, which supersede their Employment Agreements upon a change of control
of the Company (as defined in the Change of Control Agreements). In the event a
Named Officer is involuntarily terminated or terminates for good reason within
two years of a change of control of the Company, or voluntarily terminates for
any reason during a 30-day window beginning six months after a change of control
of the Company, the Change of Control Agreement provides a) a minimum severance
benefit of 2.99 times annual base salary plus two times annual bonus award
opportunity, b) the Money Purchase Pension Plan contributions and Savings Plan
matching amounts that would have been made if the Named Officer had continued to
be employed for three years, c) three years of medical and dental coverage, d)
three years age and service credit for eligibility for the Company's retiree
medical coverage, and e) outplacement services not to exceed $50,000. In
addition, the Change of Control Agreements provide reimbursement for any excise
tax, interest and penalties incurred if payments or benefits received due to a
change of control create an excise tax liability under Section 280G of the
Internal Revenue Code.
In order to ensure continuity of operations in the event of a change
of control of the Company, as defined in the Company's Change of Control
Severance Plan, a retention bonus plan would become effective. To be eligible to
receive the retention bonus, an employee must stay with the Company through the
effective date of the change of control and be employed by the acquiring company
180 days after the effective date, or be involuntarily terminated, as defined in
the Company's Change of Control Severance Plan, by the acquiring company on or
within 180 days after the effective date. Eligible employees would receive a
bonus equal to the most recent bonus they had received under the Company's
Annual Bonus Program, payable upon the earlier of 180 days after the effective
date of the change of control or upon severance.
In addition, in the event of a change of control of the Company, as
defined in the Company's Change of Control Severance Plan, holders of certain
outstanding stock options granted under the Company's Bonus Stock Option
Program, the All-Employee Stock Option Program and the Directors Stock Option
Plan would be offered the opportunity to request that their rights under such
grants be waived in return for a cash payment equal to 75 percent of the
theoretical Black-Scholes value for each grant, as determined on the date a
press release is issued announcing a pending shareholder vote,
tender offer, or other transaction which, if approved or consummated, would
constitute a change of control of the Company as defined in the Company's Change
of Control Severance Plan. Holders of certain outstanding stock options granted
outside of the programs described above, would be offered the opportunity to
request that their rights under such grants be waived in return for a cash
payment only upon an involuntary termination of employment, as defined in the
Company's Change of Control Severance Plan.
EMPLOYMENT CONTRACTS
Mr. Papa has entered into an employment agreement with the Company,
which was amended on June 20, 2001. Pursuant to the amended employment
agreement, Mr. Papa currently serves as Chairman of the Board and Chief
Executive Officer at a minimum annual salary of $650,000. Upon signing the
amendment, Mr. Papa was granted 60,000 shares of restricted stock that vest on
May 8, 2006. In the event of his involuntary termination, Mr. Papa would receive
a severance benefit equal to the greater of a) the salary and annual bonus award
he would have received from the date of termination through the end of the Term
of the employment agreement if his employment had continued or b) two times the
sum of his then current annual base salary and his annual bonus award
opportunity. In addition, in the event of his involuntary termination, Mr. Papa
would receive the value of unvested stock options based on the difference
between the Company's stock price at termination and the grant price of such
options. The amended employment agreement contains a noncompete provision
applicable in the event of Mr. Papa's termination of employment. The amended
employment agreement expires on May 31, 2006, but will automatically be renewed
annually for a one-year term unless either Mr. Papa or the Company provides a
120-day notice of intent not to renew.
Mr. Segner has entered into an employment agreement with the Company,
which was amended on June 22, 2001. Pursuant to the amended employment
agreement, Mr. Segner currently serves as President and Chief of Staff at a
minimum annual salary of $445,000. Upon signing the amendment, Mr. Segner was
granted 30,000 shares of restricted stock that vest on May 8, 2006. In the event
of his involuntary termination, Mr. Segner would receive a severance benefit
equal to the greater of a) the salary and annual bonus award he would have
received from the date of termination through the end of the Term of the
employment agreement if his employment had continued or b) two times the sum of
his then current annual base salary and his annual bonus award opportunity. In
addition, in the event of his involuntary termination, Mr. Segner would receive
the value of unvested stock options based on the difference between the
Company's stock price at termination and the grant price of such options. The
amended employment agreement contains a noncompete provision applicable in the
event of Mr. Segner's termination of employment. The amended employment
agreement expires on May 31, 2006, but will automatically be renewed annually
for a one-year term unless either Mr. Segner or the Company provides a 120-day
notice of intent not to renew.
Mr. Leiker has entered into an employment agreement with the Company,
which was amended on July 1, 2001. Pursuant to the amended employment agreement,
Mr. Leiker currently serves as Executive Vice President, Exploration and
Development at a minimum annual salary of $285,000. Upon signing the amendment,
Mr. Leiker was granted 30,000 shares of restricted stock that vest on May 8,
2006. In the event of his involuntary termination, Mr. Leiker would receive a
severance benefit equal to the greater of a) the salary and annual bonus award
he would have received from the date of termination through the end of the Term
of the employment agreement if his employment had continued or b) the sum of his
then current annual base salary and his annual bonus award opportunity. The
amended employment agreement contains a noncompete provision applicable in the
event of Mr. Leiker's termination of employment. The amended employment
agreement expires on May 31, 2006, but will automatically be renewed annually
for a one-year term unless either Mr. Leiker or the Company provides a 120-day
notice of intent not to renew.
Mr. Thomas has entered into an employment agreement with the Company,
which was amended on July 1, 2001. Pursuant to the amended employment agreement,
Mr. Thomas currently serves as Executive Vice President, North America
Operations at a minimum annual salary of $285,000. Upon signing the amendment,
Mr. Thomas was granted 30,000 shares of restricted stock that vest on May 8,
2006. In the event of his involuntary termination, Mr. Thomas would receive a
severance benefit equal to the greater of a) the salary and annual bonus award
he would have received from the date of termination through the end of the Term
of the employment agreement if his employment had continued or b) the sum of his
then current annual base salary and his annual bonus award opportunity. The
amended employment agreement contains a noncompete provision applicable in the
event of Mr. Thomas's termination of employment. The amended employment
agreement expires on May 31, 2006, but will automatically be renewed annually
for a one-year term unless either Mr. Thomas or the Company provides a 120-day
notice of intent not to renew.
Mr. Hunsaker has entered into an employment agreement with the
Company, which was amended on June 29, 2001. Pursuant to the amended employment
agreement, Mr. Hunsaker currently serves as Senior Vice President and General
Counsel at a minimum annual salary of $276,000. Upon signing the amendment, Mr.
Hunsaker was granted 15,000 shares of restricted stock that vest on May 8, 2006.
In the event of his involuntary termination, Mr. Hunsaker would receive a
severance benefit equal to the greater of a) the salary and annual bonus award
he would have received from the date of termination through the end of the Term
of the employment agreement if his employment had continued or b) the sum of his
then current annual base salary and his annual bonus award opportunity. In
addition, in the event of his involuntary termination, Mr. Hunsaker would
receive reimbursement for the difference between the cost of COBRA coverage and
a private medical insurance policy for a maximum of six months beyond the end of
his eligibility for COBRA coverage. The amended employment agreement contains a
noncompete provision applicable in the event of Mr. Hunsaker's termination of
employment. The amended employment agreement expires on May 31, 2006, but will
automatically be renewed annually for a one-year term unless either Mr. Hunsaker
or the Company provides a 120-day notice of intent not to renew.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors and
persons who own more than 10% of the Common Stock to file reports of ownership
and changes in ownership concerning the Common Stock with the SEC and to furnish
the Company with copies of all Section 16(a) forms they file. Based solely upon
the Company's review of the Section 16(a) filings that have been received by the
Company, the Company believes that all filings required to be made under Section
16(a) during 2004 were timely made.
ITEM 2.
RATIFICATION OF APPOINTMENT OF AUDITORS
GENERAL
During fiscal years 2004 and 2003, the Company retained its principal
auditors, Deloitte & Touche LLP ("Deloitte"), independent public accountants, to
provide services in the following categories and amounts:
Audit Fees. The aggregate fees billed for professional services
rendered by Deloitte for the audit of the Company's financial statements for the
fiscal years ended December 31, 2004 and December 31, 2003, and the reviews of
the financial statements included in the Company's Forms 10-Q for such fiscal
years were $958,690 and $509,688, respectively.
Audit-Related Fees. The aggregate fees billed for each of the fiscal
years ended December 31, 2004 and December 31, 2003 for assurance and related
services rendered by Deloitte that are reasonably related to the performance of
the audit or review of the Company's financial statements but not reportable as
Audit Fees were $41,500 and $118,110, respectively. Audit-Related Fees in 2004
were primarily for the Company's benefit plan audits. Audit-Related Fees in 2003
were primarily for the Company's benefit plan audits, the Company's United
Kingdom statutory audits, consultation regarding the Sarbanes-Oxley Act of 2002,
agreed upon procedures and audit related support.
Tax Fees. There were no professional services rendered by Deloitte for
tax compliance, tax advice, and tax planning for the fiscal years ended December
31, 2004 and December 31, 2003.
All Other Fees. The aggregate fees billed for services rendered by
Deloitte not reportable as Audit Fees, Audit-Related Fees or Tax Fees for each
of the fiscal years ended December 31, 2004 and December 31, 2003 were $72,043
and $67,232, respectively. All Other Fees in 2004 and 2003 primarily relate to
software license renewals and conference registration fees. Twenty-eight percent
of these services for the fiscal year ended December 31, 2004 were approved by
the Audit Committee pursuant to the de minimis exception of the Sarbanes-Oxley
Act of 2002.
Pre-Approval of Audit and Non-Audit Services. The Audit Committee of
the Company pre-approves all audit and non-audit services provided to the
Company by the Company's independent auditors at the first meeting of each
calendar year and at subsequent meetings as necessary. The non-audit services to
be provided are specified and shall not exceed a specified dollar limit. During
the course of a fiscal year, if additional non-audit services are identified,
these services are presented to the Audit Committee for pre-approval. Management
of the Company is directed to provide a report to the Audit Committee at each
meeting of the Audit Committee during the remainder of the calendar year,
showing in reasonable detail the services provided by the independent auditors
to the Company since the first day of the calendar year, as well as the
estimated cost to date of audit and non-audit services. The Audit Committee has
delegated to the Chairman of the Audit Committee the authority to approve
non-audit services provided by the independent auditors to the Company under the
de minimis exception of the Sarbanes-Oxley Act of 2002.
RATIFICATION OF APPOINTMENT FOR 2005
The Audit Committee of the Board of Directors appointed Deloitte to
audit the consolidated financial statements of the Company for the year ending
December 31, 2005.
Ratification of this appointment shall be effective upon receiving the
affirmative vote of the holders of a majority of the Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting. Accordingly,
under Delaware law and the Restated Certificate of Incorporation and bylaws of
the Company, abstentions would have the same legal effect as a vote against this
proposal, but a broker non-vote would not be counted for purposes of determining
whether a majority had been achieved.
In the event the appointment is not ratified, the Audit Committee will
consider the appointment of other independent auditors. A representative of
Deloitte is expected to be present at the Annual Meeting and will be available
to make a statement if such representative desires to do so and to respond to
appropriate questions.
The Board of Directors recommends voting "FOR" this proposal.
ITEM 3.
APPROVAL OF AN A MENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
GENERAL
At its February 24, 2005 meeting, the Board of Directors of the
Company adopted the following proposed amendment to the Company's Restated
Certificate of Incorporation and declared the proposed amendment to be
advisable:
NOW, THEREFORE, BE IT RESOLVED, that the Restated Certificate of
Incorporation be amended by deleting Paragraph A. of Article Fourth thereof in
its entirety and substituting the following in its entirety therefore:
"FOURTH: A. The total number of shares of all classes of stock that
the Corporation shall have the authority to issue is Six Hundred Fifty
Million (650,000,000) shares, consisting of Six Hundred Forty Million
(640,000,000) shares of common stock, par value $.01 per share
(hereinafter referred to as "Common Stock") and Ten Million
(10,000,000) shares of preferred stock, par value $.01 per share
(hereinafter referred to as "Preferred Stock")."
The Board of Directors has proposed that the amendment, a copy of
which is attached to this proxy statement as APPENDIX A, be submitted to a vote
of the Company's stockholders at the Annual Meeting.
REASONS FOR THE PROPOSED AMENDMENT
On February 2, 2005, the Board of Directors approved a two-for-one
stock split in the form of a stock dividend. The Company's Restated Certificate
of Incorporation currently authorizes the Company to issue up to 320,000,000
shares of Common Stock and up to 10,000,000 shares of Preferred Stock. As of the
record date for the Annual Meeting, approximately 238,981,689 shares of Common
Stock and 100,000 shares of Preferred Stock were outstanding. The Board of
Directors believes it is desirable and in the best interests of the Company and
the stockholders to increase the number of authorized shares of Common Stock
from 320 million shares to 640 million shares to provide the Company with
sufficient authorized shares for future corporate purposes, which may include,
but are not limited to the following:
. corporate transactions, such as stock splits or stock
dividends;
. financing transactions, such as public offerings of Common
Stock or convertible securities;
. acquisitions;
. strategic investments;
. incentive and employee benefit plans; and
. otherwise for corporate purposes that have not yet been
identified.
The Company has no present plans, arrangements or understandings to
issue additional shares of Common Stock, although it reserves the right to do so
in the future. If approved by the stockholders, the additional authorized shares
of Common Stock would be available for issuance, at the discretion of the
Company's Board of Directors, in such amounts and upon such terms, as the Board
of Directors may determine, without further stockholder approval (subject to
applicable Delaware law and New York Stock Exchange rules).
Holders of the Company's Common Stock do not have preemptive rights
with respect to future issuances of additional shares of Common Stock, which
means that current stockholders do not have a prior right to purchase any new
issue of the Company's Common Stock to maintain their proportionate ownership
interest. As a result, the issuance of a significant amount of additional
authorized Common Stock (other than as the result of a stock split or other pro
rata distribution to stockholders) would result in a significant dilution of the
beneficial ownership interests and/or voting power of each stockholder who does
not purchase additional shares to maintain his or her pro rata interest. As
additional shares are issued, the shares owned by existing stockholders will
represent a smaller percentage ownership interest in the Company.
The Company's Board of Directors does not intend or view the proposed
increase in the number of authorized shares of Common Stock as an anti-takeover
measure. The proposal to increase the authorized shares of the Company's
Common Stock was not prompted by any takeover or acquisition effort or threat.
The Company is not aware of any threat of takeover or change in control, nor is
the Company proposing to stockholders any anti-takeover measures.
The proposal to amend the Company's Restated Certificate of
Incorporation will require for approval the affirmative vote of holders of a
majority of our outstanding shares of Common Stock.
The Board of Directors recommends voting "FOR" this proposal.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Shareholders may propose matters to be presented at shareholder
meetings and may also nominate persons to be directors. Formal procedures have
been established for those proposals and nominations.
PROPOSALS FOR 2006 ANNUAL MEETING
Pursuant to certain rules promulgated by the SEC, any proposals of
holders of Common Stock of the Company intended to be presented at the Annual
Meeting of Shareholders of the Company to be held in 2006 must be received by
the Company, addressed to Patricia L. Edwards, Vice President, Human Resources,
Administration & Corporate Secretary (the "Secretary"), 333 Clay Street, Suite
4200, Houston, Texas 77002, no later than November 30, 2005, to be included in
the Company's proxy statement and form of proxy relating to that meeting.
In addition to the SEC rules referred to in the preceding paragraph,
the Company's bylaws provide that for business to be properly brought before the
Annual Meeting of Shareholders, it must be either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (b) otherwise brought before the meeting by or at the direction of
the Board of Directors, or (c) otherwise properly brought before the meeting by
a shareholder of the Company who is a shareholder of record at the time of
giving of notice hereinafter provided for, who shall be entitled to vote at such
meeting and who complies with the following notice procedures. In addition to
any other applicable requirements for business to be brought before an annual
meeting by a shareholder of the Company, the shareholder must have given timely
notice in writing of the business to be brought before an Annual Meeting of
Shareholders of the Company to the Secretary of the Company. To be timely,
notice given by a shareholder must be delivered to or mailed and received at the
principal executive offices of the Company, 333 Clay Street, Suite 4200,
Houston, Texas 77002, no later than November 30, 2005. The notice shall set
forth as to each matter the shareholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and address, as they appear on the Company's books, of
the shareholder proposing such business, (iii) the acquisition date, the class
and the number of shares of voting stock of the Company which are owned
beneficially by the shareholder, (iv) any material interest of the shareholder
in such business, and (v) a representation that the shareholder intends to
appear in person or by proxy at the meeting to bring the proposed business
before the meeting. Notwithstanding the foregoing bylaw provisions, a
shareholder must also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder with respect to the matters set forth in the foregoing
bylaw provisions. Notwithstanding anything in the Company's bylaws to the
contrary, no business shall be conducted at the annual meeting except in
accordance with the procedures outlined above.
NOMINATIONS FOR 2006 ANNUAL MEETING AND FOR ANY SPECIAL MEETINGS
Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors. Nominations of persons
for election to the Company's Board of Directors may be made at a meeting of
shareholders (a) by or at the direction of the Board of Directors or (b) by any
shareholder of the Company who is a shareholder of record at the time of giving
of notice hereinafter provided for, who shall be entitled to vote for the
election of directors at the meeting and who complies with the following notice
procedures. Such nominations, other than those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the Company. To be timely, notice given by a shareholder shall
be delivered to or mailed and received at the principal executive offices of the
Company, 333 Clay Street, Suite 4200, Houston, Texas 77002, (i) with respect to
an election to be held at the 2006 Annual Meeting of Shareholders of the
Company, on or before November 30, 2005, and (ii) with respect to an election to
be held at a special meeting of shareholders of the Company for the election of
directors, not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or public
disclosure of the date of meeting was made, whichever first occurs. Such notice
shall set forth (a) as to each person whom the shareholder proposes to nominate
for election or re-election as a director, all information relating to the
person that is required to be disclosed in solicitations for proxies for
election of directors, or is otherwise required, pursuant to
Regulation 14A under the Exchange Act (including the written consent of such
person to be named in the proxy statement as a nominee and to serve as a
director if elected); and (b) as to the shareholder giving the notice (i) the
name and address, as they appear of record on the Company's books, of such
shareholder, and (ii) the class and number of shares of capital stock of the
Company which are beneficially owned by the shareholder. In the event a person
is validly designated as a nominee to the Board of Directors and shall
thereafter become unable or unwilling to stand for election to the Board of
Directors, the Board of Directors or the shareholder who proposed such nominee,
as the case may be, may designate a substitute nominee. Notwithstanding the
foregoing bylaw provisions, a shareholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in the foregoing bylaw provisions.
GENERAL
As of the date of this proxy statement, the management of the Company
has no knowledge of any business to be presented for consideration at the
meeting other than that described above. If any other business should properly
come before the meeting, it is intended that the shares represented by proxies
will be voted with respect thereto in accordance with the judgment of the
persons named in such proxies.
In addition to solicitation by use of the mails, certain officers and
employees of the Company, or employees of Morrow & Co., Inc., may solicit the
return of proxies by telephone, telegraph or personal interview. The cost of any
solicitation of proxies will be borne by the Company. Arrangements may also be
made with brokerage firms and other custodians, nominees and fiduciaries for the
forwarding of material to and solicitation of proxies from the beneficial owners
of Common Stock held of record by such persons, and the Company will reimburse
such brokerage firms, custodians, nominees and fiduciaries for reasonable out of
pocket expenses incurred by them in connection therewith.
By Order of the Board of Directors,
PATRICIA L. EDWARDS
Vice President, Human Resources,
Administration & Corporate Secretary
Houston, Texas
March 30, 2005
APPENDIX A
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
EOG RESOURCES, INC.
EOG Resources, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Company"), does hereby certify that:
The amendment to the Company's Restated Certificate of Incorporation
set forth in the following resolution approved by the Company's Board of
Directors and stockholders was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware:
"NOW, THEREFORE, BE IT RESOLVED, that the Restated Certificate of
Incorporation be amended by deleting Paragraph A. of Article
Fourth thereof in its entirety and substituting the following in
its entirety therefore:
"FOURTH: A. The total number of shares of all classes of stock
that the Corporation shall have the authority to issue is Six
Hundred Fifty Million (650,000,000) shares, consisting of Six
Hundred Forty Million (640,000,000) shares of common stock, par
value $.01 per share (hereinafter referred to as "Common Stock")
and Ten Million (10,000,000) shares of preferred stock, par value
$.01 per share (hereinafter referred to as "Preferred Stock")."
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed by its duly authorized officer as of this ____ day of _____ 2005.
EOG RESOURCES, INC.
By:
----------------------------------
Name:
Title: