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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant þ | |
Filed by a Party other than the Registrant o | |
Check the appropriate box: |
þ Preliminary Proxy Statement | |
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
o Definitive Proxy Statement | |
o Definitive Additional Materials | |
o Soliciting Material Pursuant to §240.14a-12 |
ENERGEN CORPORATION
Payment of Filing Fee (Check the appropriate box):
þ No fee required. | |
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
1) Title of each class of securities to which transaction applies: |
2) Aggregate number of securities to which transaction applies: |
3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
4) Proposed maximum aggregate value of transaction: |
5) Total fee paid: |
o Fee paid previously with preliminary materials. |
o 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: |
SEC 1913 (02-02) | Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
ENERGEN CORPORATION 605 Richard Arrington Jr. Blvd. North Birmingham, Alabama 35203-2707 (205) 326-2700 |
March 24, 2005
It is our pleasure to extend to you a cordial invitation to attend the Annual Meeting of Shareholders of Energen Corporation. The Annual Meeting will be held at the principal office of the Company in Birmingham, Alabama on Wednesday, April 27, 2005, at 10:00 A.M., Central Daylight Time.
Details of the matters to be presented at this meeting are given in the Notice of the Annual Meeting and in the proxy statement that follow.
We hope that you will be able to attend this meeting so that we may have the opportunity of meeting with you and discussing the affairs of the Company. However, if you cannot attend, we would appreciate your signing and returning the enclosed proxy card as soon as convenient so that your stock may be voted.
We have enclosed a copy of the Companys 2004 Annual Report.
Yours very truly, | |
Chairman of the Board |
ENERGEN CORPORATION
Notice of Annual Meeting of Shareholders
To Be Held April 27, 2005
TIME | 10:00 a.m., CDT, on Wednesday, April 27, 2005 | |
PLACE | Energen Plaza | |
605 Richard Arrington Jr. Blvd. North | ||
Birmingham, Alabama 35203-2707 | ||
ITEMS OF BUSINESS | (1) To elect three members of the Board of Directors for three-year terms. | |
(2) To adopt a proposed amendment to the Companys Restated Certificate of Incorporation increasing the number of authorized shares of common stock. | ||
(3) To transact such other business as may properly come before the Meeting and any adjournment or postponement. | ||
RECORD DATE | You can vote if you are a shareholder of record of the Company on March 4, 2005. | |
PROXY VOTING | It is important that your shares be represented and voted at the meeting. You can vote your shares by completing and returning the proxy card sent to you. You can revoke a proxy at any time prior to exercise at the Meeting by following the instructions in the accompanying proxy statement. |
J. DAVID WOODRUFF | |
Secretary |
Birmingham, Alabama
YOUR VOTE IS IMPORTANT
You are urged to date, sign and promptly
PROXY STATEMENT
TABLE OF CONTENTS
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 27, 2005
We are providing this proxy statement in connection with the solicitation by the Board of Directors of Energen Corporation, an Alabama corporation (the Company, we, or us), of proxies for use at the 2005 Annual Meeting of Shareholders of the Company and at any adjournment thereof (the Annual Meeting).
You are invited to attend our Annual Meeting on April 27, 2005, beginning at 10:00 a.m., CDT. The Annual Meeting will be held at our principal office, 605 Richard Arrington Jr. Blvd. North, Birmingham, Alabama 35203-2707.
This proxy statement and form of proxy are being mailed on or about March 24, 2005.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
Item 1: Election of Directors
Three Directors are to be elected. Our Board of Directors is divided into three classes serving staggered three-year terms. The terms of four of the present Directors expire at this Annual Meeting. One of our Directors, Wallace L. Luthy, is retiring from the Board of Directors and is not standing for reelection. The remaining three Directors, J. Mason Davis, Jr., James S.M. French and David W. Wilson, have been nominated for re-election as Directors for terms expiring in 2008.
Your Board of Directors recommends that J. Mason Davis, Jr., James S.M. French and David W. Wilson be elected to serve in the class with terms expiring in 2008. Each nominee has agreed to be named in this proxy statement and to serve if elected. We expect each nominee for election as a Director to be able to serve if elected. Biographical data on these nominees and the other members of the Board of Directors is presented at page 4 of this proxy statement under the caption Governance of the Company.
Unless you otherwise direct on the proxy form, the proxy holders intend to vote your shares in favor of the above listed nominees. To be elected, a nominee must receive a plurality of the votes cast at the Annual Meeting in person or by proxy. If one or more of the nominees becomes unavailable for election or service as a Director, the proxy holders may vote your shares for one or more substitutes designated by the Board of Directors; alternatively, we may reduce the size of the Board of Directors.
Item 2: Amendment of our Restated Certificate of Incorporation
Our Restated Certificate of Incorporation as presently in effect allows the Company to issue 75,000,000 shares of common stock of the Company, par value $0.01 per share. The Board of Directors recommends the approval of an amendment to the Restated Certificate of Incorporation of the Company to increase the number of authorized shares of common stock of the Company from 75,000,000 to 150,000,000 shares. If the shareholders approve the increase in the number of authorized shares of common stock, the Board of Directors of the Company presently intends to declare a two-for-one split of the
The increase in the number of authorized shares of common stock will afford the Company greater flexibility in financial matters and will ensure that sufficient shares of common stock are available for issuance for such purposes as the Board of Directors determines to be in the best interests of the Company. Except for the proposed stock split and the issuance of shares of common stock in connection with certain existing employee benefit plans, we have no commitments or understandings relating to the issuance of additional shares of common stock.
Your Board of Directors recommends that you vote FOR the approval of the proposed amendment to the Restated Certificate of Incorporation increasing the number of authorized shares of common stock. An affirmative vote of the holders of a majority of the outstanding shares of our common stock is necessary to approve the amendment to our Restated Certificate of Incorporation to increase the number of shares of common stock authorized to be issued.
Item 3: | Other Business |
We know of no other business that will be considered for action at the Annual Meeting. If any other business calling for a vote of shareholders is properly presented at the meeting, the proxy holders will vote your shares in accordance with their best judgment.
PROXY AND VOTING PROCEDURES
Shareholders Entitled to Vote
Holders of Company common stock of record at the close of business on March 4, 2005, are entitled to receive this notice of Annual Meeting and proxy statement and to vote their shares at the Annual Meeting. As of that date, a total of [36,609,017 as of February 14, 2005] shares of common stock were outstanding and entitled to vote. Each share of common stock is entitled to one vote on each matter properly brought before the Annual Meeting.
Filing of Proxies
Your vote is important. You can save us the expense of a second mailing by voting promptly. Because many shareholders cannot attend the Annual Meeting in person, it is necessary that a large number be represented by proxy. Please mark your proxy, date and sign it, and return it in the postage-paid envelope provided. The proxy holders will vote all properly completed proxies in accordance with the instructions appearing on such proxies.
Revocation of Proxies
You can revoke your proxy at any time before it is exercised by:
| written notice to the Secretary of the Company; | |
| timely delivery of a valid, later-dated proxy; or | |
| voting by ballot at the Annual Meeting. |
Voting at the Annual Meeting
Mailing your proxy will in no way limit your right to vote at the Annual Meeting if you later decide to attend in person. If your shares are held in the name of a bank, broker or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the Annual Meeting.
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All shares for which a proxy card has been returned and not revoked will be voted at the Annual Meeting. If you sign and return your proxy card but do not give voting instructions, the shares represented by that proxy will be voted as recommended by the Board of Directors.
Required Vote
The presence of the holders of a majority of the outstanding shares of common stock entitled to vote at the Annual Meeting, present in person or represented by proxy, is necessary to constitute a quorum. Abstentions and broker non-votes are counted as present and entitled to vote for purposes of determining a quorum. A broker non-vote occurs when a broker holding shares for a beneficial owner does not vote on a particular proposal because the broker does not have discretionary voting power for that particular item and has not received voting instructions from the beneficial owner.
Each of the nominees for Director must receive the affirmative vote of a majority of the votes cast by shareholders represented at the Annual Meeting as part of the quorum. Only votes for or withhold authority affect the outcome. Abstentions and broker non-votes are not counted for purposes of the election of Directors. Alabama law requires, for the approval of the amendment to our Restated Certificate of Incorporation to increase our authorized shares of common stock, the affirmative vote of the holders of a majority of the outstanding shares of the Companys common stock. Accordingly, abstentions and broker non-votes will have the same effect as a vote against the proposed amendment.
Under New York Stock Exchange Rules, if you are a beneficial owner and your broker holds your shares in its name, your broker is permitted to vote your shares on the election of Directors and the proposal to approve the amendment to our Restated Certificate of Incorporation even if the broker does not receive voting instructions from you if the broker has complied with rules concerning the delivery of proxy materials to beneficial owners.
At the date this proxy statement went to press, we did not know of any other matters to be raised at the Annual Meeting. Except as otherwise provided by law, other matters voted on at the Annual Meeting will be determined by the majority of votes cast at the Annual Meeting in person or by proxy by shareholders entitled to vote on the matter. As to matters requiring the vote of a majority of the shares either present or outstanding, and entitled to vote on the matter, abstentions and broker non-votes have the same effect as a vote against the matter (unless the broker does not have discretionary authority to vote under Alabama law or New York Stock Exchange Rules).
GOVERNANCE OF THE COMPANY
The persons who comprise our Board of Directors, including the three nominees for election, are identified below. We have not included information with respect one current Board member, Wallace L. Luthy, who is retiring from our Board when his term ends on the date of the 2005 Annual Meeting.
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NOMINEES FOR ELECTION AS DIRECTORS
Name and Year First Became Director | Principal Occupation and Other Information | |
J. MASON
DAVIS, JR. Director since 1992
|
Mr. Davis, 69, is a partner with the Birmingham,
Alabama law firm of Sirote & Permutt, P.C. He
joined that firm in 1984. Mr. Davis also served as an
Adjunct Professor of Law at the University of Alabama School of
Law in Tuscaloosa, Alabama from 1972 to 1997.
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JAMES S.M. FRENCH Director since 1979
|
Mr. French, 64, is Chairman of the Board of Dunn
Investment Company, the parent of a group of companies in the
construction industry and also an investor in equity and income
securities in selected industries. Dunn was founded in 1878 and
is headquartered in Birmingham. He joined the firm in 1968 and
became its President in 1974. In addition to Energen,
Mr. French serves as a director of three other publicly
traded companies Regions Financial Corporation;
Hilb, Rogal and Hamilton Company, a network of insurance
agencies; and Protective Life Corporation. He is also a director
of the subsidiaries of Dunn Investment Company.
|
|
DAVID W. WILSON Director since 2004
|
Mr. Wilson, 61, is an independent energy
consultant. From 1993 until his retirement in 2000, he led
PricewaterhouseCoopers Energy Strategic Advisory Services
Group. From 1985 through 1988 he was President of Gas
Acquisition Services, a gas management consulting firm; from
1977 through 1985 he served as Vice President, Exploration and
Corporate Development of Consolidated Oil and Gas; and from 1975
through 1977 he served as Manager, Diversification Programs for
Williams Exploration. Prior to 1977 he held various positions in
the oil and gas exploration and production industry.
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DIRECTORS WHOSE TERMS EXPIRE IN 2006
Name and Year First Became Director | Principal Occupation and Other Information | |
JUDY M. MERRITT Director since 1993
|
Dr. Merritt, 61, is President of Jefferson State
Community College located in Birmingham, Alabama.
Dr. Merritt was named President in 1979 and, with the
exception of a four-year assignment at Florida International
University in Miami, Florida from 1975 to 1979, has been
associated with Jefferson State and its predecessor since 1965.
|
|
STEPHEN A. SNIDER Director since 2000
|
Mr. Snider, 57, is President, Chief Executive
Officer and a director of Universal Compression Holdings, Inc.,
a contract gas compression business headquartered in Houston,
Texas. Mr. Snider joined Tidewater Compression in 1975 as
General Manager of air compressor operations. In 1979,
Mr. Snider established Tidewater Compressions
operations in the northeastern United States. In 1981, he
assumed responsibility for the western United States operations
of Tidewater Compression. Mr. Snider left Tidewater in 1983
to own and operate businesses unrelated to the energy industry.
Mr. Snider returned to Tidewater Compression in 1991 as
Senior Vice President of Compression. Tidewater was sold in 1998
and the name of the company was changed to Universal Compression
Holdings, Inc. Mr. Snider was named to his current position
in 1994. Mr. Snider is also a director of one other
publicly traded company T-3 Energy Services, Inc.
|
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Name and Year First Became Director | Principal Occupation and Other Information | |
GARY C. YOUNGBLOOD Director since 2003
|
Mr. Youngblood, 61, retired in January 2003 as
President and Chief Operating Officer of Alabama Gas
Corporation, a subsidiary of the Company. Mr. Youngblood
was employed by Alabama Gas Corporation in various capacities
for 34 years. He was elected its Executive Vice President
in 1993, its Chief Operating Officer in 1995, and its President
in 1997. Mr. Youngblood has long been active in industry
and community affairs. He is a past Chairman of the Birmingham
Chamber of Commerce, has served as a director of the Public
Affairs Research Council of Alabama, and was Chair of the
Central Alabama United Way 2000 campaign. He served as President
of the Alabama Natural Gas Association and the Southeast Gas
Association. Until his retirement, Mr. Youngblood was a
director of the Southern Gas Association, and served on the
Leadership Council of the American Gas Association.
|
DIRECTORS WHOSE TERMS EXPIRE IN 2007
Name and Year First Became Director | Principal Occupation and Other Information | |
STEPHEN D. BAN Director since 1992
|
Dr. Ban, 64, is the Director of the Technology
Transfer Division of the Argonne National Laboratory, a
science-based Department of Energy laboratory dedicated to
advancing the frontiers of science in energy, environment,
biosciences and materials. He has held this position since March
2002. He previously served as President and Chief Executive
Officer of Gas Research Institute (GRI), a nonprofit cooperative
research organization of the natural gas industry, headquartered
in Chicago. He joined GRI in 1981, was elected President in
1987, and served as CEO until 2000. In that position he had
overall responsibility for GRIs multifaceted research and
development program in natural gas supply, transmission, and
end-use technologies. Dr. Ban is also a director of one
other publicly traded company UGI Corporation, a
Pennsylvania gas and electric utility and national marketer of
liquid propane. Dr. Ban has also served on the boards of
the United States Energy Association and the New England Gas
Association.
|
|
JULIAN W. BANTON Director since 1997
|
Mr. Banton, 64, retired in December 2003 as
President and as a director of SouthTrust Corporation.
Mr. Banton previously had stepped down as Chairman of the
Board and Chief Executive Officer of SouthTrust Bank in October
2003. He joined SouthTrust in 1982, was named President in 1985
and in 1988 was named Chairman of the Board and Chief Executive
Officer. Prior to joining SouthTrust, Mr. Banton was in
charge of Corporate and International Banking for Signet Bank in
Richmond, Virginia.
|
|
T. MICHAEL GOODRICH Director since
2000
|
Mr. Goodrich, 59, is Chairman of the Board and
Chief Executive Officer of BE&K, Inc., a privately owned
engineering and construction firm headquartered in Birmingham,
Alabama. He joined BE&K in 1972 as Assistant Secretary and
General Counsel, was named President in 1989 and was named to
his current position in 1995. In addition to Energen,
Mr. Goodrich serves as a director of one other publicly
traded company Synovus Financial Corp. He is also a
director of First Commercial Bank and several subsidiary
companies of BE&K, Inc.
|
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Name and Year First Became Director | Principal Occupation and Other Information | |
WM. MICHAEL
WARREN, JR. Director since 1986
|
Mr. Warren, 57, is Chairman of the Board,
President and Chief Executive Officer of the Company and is a
director of the Company and each of its subsidiaries. He joined
Alabama Gas Corporation in 1983 and was elected President in
1984. He was elected President and Chief Operating Officer of
the Company in February, 1991, was elected President and Chief
Executive Officer of Alabama Gas Corporation and Energen
Resources Corporation in September, 1995, was elected Chief
Executive Officer of the Company in February, 1997, and was
elected Chairman of the Board in January, 1998. In addition to
Energen, Mr. Warren serves as a director of one other
publicly traded company Protective Life Corporation.
He is also a director of Associated Electric & Gas
Insurance Services Limited, a mutual insurance company serving
the United States public utility industry and a member of the
Board of Trustees of Birmingham-Southern College.
Mr. Warren served as chairman of the American Gas
Association, the national trade association for gas utilities,
in 2002.
|
Each of our Directors also serves as a Director of Alabama Gas Corporation and Energen Resources Corporation, our principal subsidiaries.
Director Attendance
During 2004, the Board of Directors of the Company met eight times. All Directors of the Company attended at least 75% of the meetings of the Board of Directors and at least 75% of the meetings of committees of the Board during the time periods such Directors were serving as members of such committees. We encourage and expect our Board members to attend our Annual Meeting absent extenuating circumstances, but we do not have a formal policy requiring attendance. All of our incumbent Board members attended our Annual Meeting held in 2004.
Committees of the Board of Directors
Our Board of Directors has standing Audit, Officers Review, Finance and Governance and Nominations Committees. The current members of these Committees are as follows:
| Audit Committee Julian W. Banton (Chair until 2005 Annual Meeting), David W. Wilson (Chair effective 2005 Annual Meeting), James S.M. French, T. Michael Goodrich and Judy M. Merritt | |
| Officers Review Committee Julian W. Banton (Chair), James S.M. French, T. Michael Goodrich and Stephen A. Snider | |
| Finance Committee Stephen D. Ban (Chair), J. Mason Davis, Jr., David W. Wilson and Gary C. Youngblood | |
| Governance and Nominations Committee J. Mason Davis, Jr. (Chair), Stephen D. Ban, Judy M. Merritt and Stephen A. Snider |
Audit Committee. The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to the integrity of our financial statements, our legal and regulatory compliance and the performance of our internal and independent auditors. As part of its responsibilities, the Audit Committee is solely responsible for the appointment, compensation, retention, discharge or replacement of our independent auditors. Our Audit Committee charter describes the functions of our Audit Committee in detail, and is available on our website under the heading Investors and subheading Corporate Governance (www.energen.com). During 2004, the Audit Committee held five meetings. The Audit Committee Report is presented at page 22 of this proxy statement under the caption 2004 Audit Committee Report.
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The Board of Directors has determined that each member of the Audit Committee is independent within the meaning of applicable SEC regulations and the listing standards of the New York Stock Exchange. The Board has also determined that the Audit Committee does not include an audit committee financial expert as that term is defined in SEC regulations. In the Boards judgment, however, the Audit Committees membership meets the financial literacy and accounting or financial management requirements of the New York Stock Exchange listing standards and has qualifications and experience which enable the Committee to provide effective audit committee oversight for the Company.
Officers Review Committee. Our Officers Review Committee (ORC) considers and makes recommendations to the Board of Directors with respect to executive succession and compensation paid to officers of the Company and its subsidiaries. The ORC also administers the Companys executive compensation plans. The charter of the ORC describes the duties and functions of the ORC in detail, and is available on our website under the heading Investors and subheading Corporate Governance (www.energen.com). During 2004, the ORC held two meetings. The Report of the ORC is presented at page 17 of the proxy statement under the caption 2004 Compensation Committee Report.
Finance Committee. Our Finance Committee reviews financial policy, capital structure, significant oil and gas property acquisitions and exploration programs and also considers the issuance of securities necessary to finance our activities. The Finance Committee charter describes the duties of the Finance Committee in detail, and is available on our website under the heading Investors and subheading Corporate Governance (www.energen.com). During 2004, the Finance Committee held one meeting.
Governance and Nominations Committee. The duties of the Governance and Nominations Committee are to review and advise the Board of Directors on general governance and structure issues and to review and recommend to the Board the term and tenure of Directors, consider future Board members and recommend nominations to the Board. The charter of the Governance and Nominations Committee describes the duties of the Governance and Nominations Committee in detail. The charter and the Companys Corporate Governance Guidelines are available on our website under the heading Investors and subheading Corporate Governance (www.energen.com). During 2004, the Governance and Nominations Committee held four meetings.
Availability of Corporate Governance Documents. Shareholders may obtain copies of our Committee charters, Code of Ethics and Corporate Governance Guidelines from us without charge by requesting such documents in writing or by telephone at the following address or telephone number:
J. David Woodruff
Independence Determinations
Our Board of Directors has adopted independence standards consistent with the listing standards adopted by the New York Stock Exchange. A Director will be considered independent and found to have no material relationship with the Company if during the prior three years:
| The Director has not been an employee of the Company or any of its subsidiaries; | |
| No immediate family member of the Director has been an executive officer of the Company; | |
| Neither the Director nor an immediate family member of the Director has received more than $100,000 per year in direct compensation from the Company other than director and committee fees and pension or other forms of direct compensation for prior service (provided such compensation is not contingent in any way on future service); |
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| The Director has not been affiliated with or employed by a present or former internal or external auditor of the Company; | |
| No immediate family member of the Director has been employed as an executive officer of another company where any of the Companys present executives serve on that companys compensation committee; | |
| The Director has not been an executive officer or employee, and no immediate family member of the Director has been an executive officer, of a company that makes payments to or receives payments from the Company for property or services in an amount which, in any single fiscal year, exceeded the greater of $1 million or 2% of such other companys consolidated gross revenues. |
In January 2005, the Board reviewed the independence of its members. Based on this review and the independence standards set forth above, the Board of Directors determined that none of the Director nominees and none of the current Directors, with the exception of Messrs. Warren and Youngblood, have a material relationship with the Company other than in their capacities as members of the Board of Directors. Mr. Warren and Mr. Youngblood are considered inside Directors due to their current or prior employment as senior executives of the Company.
Selection of Board Nominees
Our Governance and Nominations Committee identifies and evaluates Board candidates using one or more informal processes deemed appropriate for the circumstances. Our chief executive officer plays a significant role in bringing potential candidates to the attention of the Committee. A determination of whether to pursue discussions with a particular individual is made after discussion by the Committee and may be preceded by formal or informal discussions involving one or all of the other Board members. Information considered by the Committee may include information provided by the candidate, the chief executive officer and one or more Committee or Board members. The Committee seeks candidates whose qualifications, experience and independence complement those of existing Board members. Board candidates are expected to possess high personal and professional ethics, integrity and values, and be committed to representing the long-term interests of the shareholders. They are also expected to have an inquisitive and objective perspective, practical wisdom and good judgment.
Once appropriate candidates have been identified, the Committee recommends nominations to our Board and to the boards of our subsidiaries. Our Governance and Nominations Committee has not adopted a policy or procedure for the consideration of director candidates recommended by shareholders. Our Board does not recall an instance in which a shareholder (other than a shareholder serving as an officer or director) has recommended a director candidate; however, as stated in prior years, the Governance and Nominations Committee will consider timely shareholder recommendations.
Communication with the Board of Directors
Based on past experience, we expect to receive and respond to shareholder communications in a variety of ways. Our Board does not want to limit this flexibility and has not implemented a defined process for shareholders to send communications to the Board. Any shareholder wishing to communicate with a member of the Board may send correspondence to his or her attention at Energen Corporation, 605 Richard Arrington Jr. Blvd. North, Birmingham, Alabama 35203-2707. The names, titles and committee assignments of our officers and Directors, together with our mailing address and telephone number, can be found on our website under the heading Investors and subheading Corporate Governance (www.energen.com). Also under that heading is a copy of the procedure adopted by our Audit Committee for the handling of inquiries and correspondence relating to errors, deficiencies and misrepresentations in accounting, internal control and audit related matters. Such inquiries and correspondence are forwarded by our General Counsel to the Chairman of our Audit Committee.
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Under our Corporate Governance Guidelines, our Board may designate a presiding director for purposes of convening and chairing meetings of our non-management directors. Mr. French currently serves in that role.
Directors Compensation
Monthly Cash Retainer Fees and Meeting Fees. During 2004, non-employee Directors were paid a monthly retainer of $2,000. Non-employee Directors also received a fee of $1,500 for each Board meeting attended, and $1,500 for each committee meeting attended. Committee Chairs received a retainer supplement of $250 per month, and members of the Audit Committee received a retainer supplement of $250 per month. No Director who is an employee of the Company is compensated for service as a member of the Board of Directors or any committee of the Board of Directors.
Share Awards and Deferred Compensation. Under the Energen Corporation 1992 Directors Stock Plan, each non-employee Director receives an annual grant of six hundred shares of common stock. Annual awards are made following the last day of each fiscal year, and only non-employee Directors who are members of our Board on such date and who have been members of the Board for at least six months are eligible. The size of this annual grant is subject to adjustment in the event of a stock dividend, stock split or similar transaction. The plan also allows each non-employee Director to elect to have any part or all of the fees payable for services as a Director of the Company and its subsidiaries paid in shares of common stock. Awards under the Directors Stock Plan are in addition to the payment of monthly cash retainers and meeting fees.
Our Board of Directors administers the Directors Stock Plan. Although the plan has no fixed duration, the Board of Directors or our shareholders may terminate the plan. Our Board of Directors also may amend the plan from time to time, but any amendment that materially increases the benefits accruing to participants, increases the number of shares of common stock which may be issued or materially modifies eligibility requirements would require the approval of our shareholders.
Under the Companys 1997 Deferred Compensation Plan, members of the Board of Directors may elect to defer part or all of their director fees and annual and/or elective grants under the Directors Stock Plan. The 1997 Deferred Compensation Plan is discussed below in greater detail under the caption 2004 Compensation Committee Report 1997 Deferred Compensation Plan.
Other. Directors have family coverage under the Companys membership in a medical emergency travel assistance program.
Code of Ethics
The Company has a Code of Ethics which is applicable to all of the Companys employees, including the principal executive officer, the principal financial officer and the principal accounting officer. The Code of Ethics is also applicable to all of the Directors of the Company. The Code of Ethics is available on our website under the heading Investors and subheading Corporate Governance (www.energen.com). We intend to post amendments to or waivers from the Code of Ethics which are applicable to the Companys directors, principal executive officer, principal financial officer and principal accounting officer at this location on our website.
PROPOSAL TO AMEND THE COMPANYS RESTATED CERTIFICATE
General
Our Board of Directors proposes to amend the Companys Restated Certificate of Incorporation to increase the number of shares of common stock we are authorized to issue from 75,000,000 to 150,000,000. Our Board of Directors presently intends to use the additional authorized shares of common stock to effect a two-for-one split of the common stock and to use the common stock for other appropriate future corporate purposes. Our Board of Directors adopted an amendment to the Companys Restated Certificate of Incorporation increasing the authorized common stock, and recommends that the shareholders adopt the
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Current Capital Structure
As of the March 4, 2005 [February 14, 2005 numbers are included, and will be updated prior to filing of definitive] record date, an aggregate of [36,609,017] shares of common stock of the Company were issued and outstanding and an additional [3,156,335] shares of common stock of the Company were reserved for issuance in connection with the Companys stock option, deferred compensation, employee stock purchase, director stock and other employee benefit plans. Also as of such record date, an additional [546,146] shares of common stock were reserved for issuance in connection with the Companys dividend reinvestment and direct stock purchase plans. Accordingly, there are only [32,903,536] shares of common stock currently available for issuance.
Reasons for the Proposed Amendment
We believe it is desirable and in the best interests of the Company and shareholders to increase the number of authorized shares of common stock from 75,000,000 to 150,000,000 to pursue a two-for-one stock split in the form of a stock dividend to shareholders and to provide the Company with sufficient authorized shares for appropriate future corporate purposes (which may not require further shareholder action or approval), including, but not limited to, future stock dividends, raising capital through common stock offerings, issuing common stock in acquisitions or other strategic transactions, and funding future employee benefit plan obligations.
Under the proposed amendment, each of the newly authorized shares of common stock will have the same rights and privileges as currently authorized shares of common stock. Adoption of the proposed amendment will not change the par value of the common stock. However, the issuance of additional shares of common stock under the proposed amendment (other than pursuant to the proposed two-for-one stock split) could dilute the earnings and book value allocable to each share of common stock. Authorized but unissued shares of common stock may also be used to oppose a hostile takeover attempt or to delay or prevent a change in control of the Company. However, the Company has no present intent to issue shares for such purpose. The proposed amendment is based on business and financial considerations, and we are not aware of any threat of takeover or change in control, nor are we proposing any additional anti-takeover measures. Except as stated herein, we do not have any current plans, understandings or agreements for the issuance or use of the proposed additional shares of common stock.
Proposed Two-for-One Stock Split
If the proposed amendment is adopted, it will become effective upon filing Articles of Amendment to the Companys Restated Certificate of Incorporation with the Judge of Probate of Jefferson County, Alabama. Subject to market conditions, the Board then intends to declare a two-for-one stock split of the Companys outstanding common stock effected in the form of a 100% stock dividend payable on the next dividend date following the declaration of the stock split, so that the resulting post-split number of shares in each shareholders account would be twice the pre-split number of shares. However, without shareholder approval of the proposed amendment, the Company would not have sufficient authorized shares to declare and carry out the proposed two-for-one stock split.
Declaration of a two-for-one stock split by the Board will have several additional consequences. Our employee benefit plans provide that outstanding options and associated exercise prices automatically will adjust to incorporate the stock split, so that individuals holding outstanding options will be able to exercise those options, post split, for two times the number of shares of common stock currently represented by those
10
Vote Required
Approval of the proposed amendment to the Companys Restated Certificate of Incorporation requires an affirmative vote of the holders of a majority of the outstanding shares of the Companys common stock. Your Board recommends a vote FOR the approval of the proposed amendment to the Companys Restated Certificate of Incorporation.
SHARE OWNERSHIP
Principal Holders
The only persons known by the Company to be beneficial owners of more than five percent (5%) of the Companys common stock are the following:
Number of | Percent | ||||||||
Shares | of Class | ||||||||
Beneficially | Beneficially | ||||||||
Name and Address of Beneficial Owner | Owned(3) | Owned(3) | |||||||
Vanguard Fiduciary Trust Company(1)
|
|||||||||
Trustee for Energen Corporation Employee Savings
Plan
|
|||||||||
500 Admiral Nelson Blvd.
|
|||||||||
Malvern, PA 19355
|
2,489,472 | 6.83 | % | ||||||
Barclays Global Investors, N.A.(2)
|
|||||||||
45 Fremont Street
|
|||||||||
San Francisco, CA 94105
|
2,676,178 | 7.34 | % |
(1) | In a Schedule 13G filed on February 10, 2005, Vanguard Fiduciary Trust Company (Vanguard), as trustee of the Energen Corporation Employee Savings Plan, reported having shared voting and dispositive power of 2,489,472 shares of common stock. All such shares of common stock had been allocated to plan participants. The Plan is a qualified voluntary contributory retirement plan, with an employee stock ownership feature. Vanguard serves as trustee for the Plan and must vote the shares held by the Plan in accordance with individual participant instructions. Both current and retired employees of the Company are participants in the Plan. |
(2) | In a Schedule 13G filed on February 14, 2005, Barclays Global Investors, N.A., and its affiliate Barclays Global Fund Advisors (together, Barclays), reported aggregate beneficial ownership of 2,676,178 shares of our common stock. Barclays is deemed to be the beneficial owner of the common stock because Barclays holds the common stock in trust accounts for the economic benefit of the beneficiaries of those accounts. All information in this footnote was obtained from the Schedule 13G filed by Barclays. |
(3) | Reflects shares reported on Schedule 13G as beneficially owned as of December 31, 2004. |
Directors and Executive Officers
As of March 4, 2005, our Directors and executive officers beneficially owned shares of our common stock as described in the table below. Except as we have noted below, each individual listed below has sole voting power and sole investment power with respect to shares they beneficially own. The final column indicates common stock share equivalents held under the Energen Corporation Deferred Compensation Plan as of
11
Number of | ||||||||||||
Shares | Percent of | |||||||||||
Beneficially | Class | Share Equivalents | ||||||||||
Name of Entity, Individual | Owned | Beneficially | Under Deferred | |||||||||
or Persons in Group | (1)(2) | Owned(2) | Plan(3) | |||||||||
Stephen D. Ban
|
10,472 | * | 0 | |||||||||
Julian W. Banton
|
2,150 | * | 5,397 | |||||||||
J. Mason Davis, Jr.
|
7,538 | * | 10,539 | |||||||||
James S. M. French
|
19,350 | * | 0 | |||||||||
T. Michael Goodrich
|
4,000 | * | 7,003 | |||||||||
Geoffrey C. Ketcham
|
18,345 | * | 17,417 | |||||||||
Wallace L. Luthy
|
77,894 | * | 8,370 | |||||||||
James T. McManus
|
37,985 | * | 10,365 | |||||||||
Judy M. Merritt
|
7,916 | * | 0 | |||||||||
Dudley C. Reynolds
|
80,993 | * | 6,548 | |||||||||
Stephen A. Snider
|
1,000 | * | 4,897 | |||||||||
Wm. Michael Warren, Jr.
|
144,885 | * | 334,827 | |||||||||
David W. Wilson
|
1,000 | * | 600 | |||||||||
J. David Woodruff
|
56,766 | * | 17,010 | |||||||||
Gary C. Youngblood
|
41,083 | * | 21,408 | |||||||||
All directors and executive officers
(16 persons)
|
518,640 | 1.42 | % | 444,926 |
* | Less than one percent. |
(1) | The shares of common stock shown above include shares owned by spouses and children, as well as shares held in trust. The shares of common stock do not include shares acquired through dividend reinvestment after December 31, 2004. Dunn Investment Company, of which Mr. French is Chairman and a director, owns 120,000 shares of common stock, which shares are not included in the totals noted above. The shares of common stock shown above for Messrs. Warren, Ketcham, McManus, Reynolds, Woodruff and the executive officers of the Company include shares which are held for their respective accounts under the Energen Corporation Employee Savings Plan as of March 4, 2005, described in note 1 above under Principal Holders. Messrs. Warren, Ketcham, Reynolds, Woodruff and all Directors and executive officers as a group hold presently exercisable options to acquire 40,370, 3,918, 30,420, 26,200 and 100,908 shares of common stock, respectively, which amounts are included in the above table. |
(2) | The number and percentage of common stock beneficially owned does not include shares of common stock credited to Company Stock Accounts under the Energen Corporation Deferred Compensation Plan. |
(3) | Represents shares of common stock credited to Company Stock Accounts under the Energen Corporation Deferred Compensation Plan as of March 4, 2005. The value of Company Stock Accounts tracks the performance of the common stock, with reinvestment of accrued dividends. The Company Stock Accounts have no voting rights. |
12
EXECUTIVE COMPENSATION
Table 1
Annual Compensation | Awards | Payouts | ||||||||||||||||||||||||||||||
Other | Restricted | Long-Term | All | |||||||||||||||||||||||||||||
Name and | Incentive | Annual | Stock | Stock | Incentive | Other | ||||||||||||||||||||||||||
Principal | Salary | Compensation | Compensation | Award(s) | Options/ | Payouts | Compensation | |||||||||||||||||||||||||
Position | Year | ($) | ($) | ($)(1) | ($)(2) | SARs | ($) | ($)(3) | ||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | ||||||||||||||||||||||||
Warren, Jr., Wm. Michael Chairman, President and Chief Executive Officer | ||||||||||||||||||||||||||||||||
2004 | 575,000 | 690,000 | 1,735 | 805,428 | 18,520 | 1,129,947 | 57,032 | |||||||||||||||||||||||||
2003 | 465,000 | 660,000 | 1,520 | 533,146 | 29,600 | 1,067,690 | 90,461 | |||||||||||||||||||||||||
2002 | 445,000 | 534,000 | 1,517 | 0 | 0 | 657,217 | 128,237 | |||||||||||||||||||||||||
Ketcham, Geoffrey C. Executive Vice President, Chief Financial Officer and Treasurer | ||||||||||||||||||||||||||||||||
2004 | 300,000 | 270,000 | 808 | 149,625 | 4,830 | 417,133 | 30,690 | |||||||||||||||||||||||||
2003 | 285,000 | 256,500 | 716 | 66,253 | 8,220 | 304,573 | 49,393 | |||||||||||||||||||||||||
2002 | 272,000 | 245,000 | 724 | 0 | 0 | 194,958 | 70,767 | |||||||||||||||||||||||||
McManus, James T. President and Chief Operating Officer of Energen Resources Corporation | ||||||||||||||||||||||||||||||||
2004 | 315,000 | 283,500 | 440 | 542,925 | 5,070 | 417,133 | 34,317 | |||||||||||||||||||||||||
2003 | 300,000 | 270,000 | 388 | 300,962 | 8,650 | 304,573 | 41,830 | |||||||||||||||||||||||||
2002 | 272,000 | 320,000 | 400 | 0 | 0 | 185,885 | 48,076 | |||||||||||||||||||||||||
Reynolds, Dudley C. President of Alabama Gas Corporation | ||||||||||||||||||||||||||||||||
2004 | 270,000 | 243,000 | 522 | 98,325 | 3,260 | 320,127 | 31,260 | |||||||||||||||||||||||||
2003 | 260,000 | 234,000 | 457 | 51,695 | 7,500 | 228,710 | 39,055 | |||||||||||||||||||||||||
2002 | 215,000 | 194,000 | 469 | 0 | 0 | 152,288 | 43,786 | |||||||||||||||||||||||||
Woodruff, J. David General Counsel and Secretary | ||||||||||||||||||||||||||||||||
2004 | 230,000 | 207,000 | 239 | 64,125 | 2,780 | 141,360 | 26,345 | |||||||||||||||||||||||||
2003 | 200,000 | 180,000 | 210 | 23,174 | 5,770 | 105,760 | 29,628 | |||||||||||||||||||||||||
2002 | 162,000 | 97,200 | 210 | 0 | 0 | 68,420 | 38,259 |
Notes to Summary Compensation Table
(1) | The amounts shown in this column represent special payments for reimbursement of tax costs for special life insurance benefits which serve as offsets to retirement income benefits pursuant to the Supplemental Agreements (see Retirement Income Plan). |
(2) | As of December 31, 2004, Mr. Warren holds a total of 31,714 restricted shares valued at $1,869,540; Mr. Ketcham holds a total of 5,730 restricted shares valued at $337,784; Mr. McManus holds a total of 18,830 restricted shares valued at $1,110,029; Mr. Reynolds holds a total of 4,040 restricted shares valued at $238,158 and Mr. Woodruff holds a total of 2,280 restricted shares valued at $134,406. The restricted shares will vest as follows: Mr. Warren 10,712 shares in 2005, 11,002 shares in 2006 and 10,000 shares in 2007; Mr. Ketcham 2,230 shares in 2006 and 3,500 shares in 2007; Mr. McManus 2,130 shares in 2006, 6,300 shares in 2007, 4,000 shares in 2008 and 6,400 shares in 2009; Mr. Reynolds 1,740 shares in 2006 and 2,300 shares in 2007; and Mr. Woodruff 780 shares in 2006 and 1,500 shares in 2007. Dividends are paid on restricted stock. The reported restricted shares include shares the receipt of which has been deferred under the Energen Corporation 1997 Deferred Compensation Plan. |
(3) | Includes contributions made by us to our defined contribution plans, car allowances, club memberships, financial planning services, participation in a medical travel assistance program and the estimated value of the economic benefit attributable to life insurance premium payments made prior to 2003. The following amounts represent the estimated value of the economic benefit received during 2004 resulting from premium payments made prior to 2003 for life insurance benefits under the Energen Corporate Officer Split Dollar Life Insurance Plan: Mr. Warren $2,532, Mr. Ketcham $1,179, Mr. McManus $642, Mr. Reynolds $761, and Mr. Woodruff $348. |
13
Table 2
Number of | ||||||||||||||||||||
Securities | Percent of Total | |||||||||||||||||||
Underlying | Options/SARs | |||||||||||||||||||
Options/SARs | Granted to | Exercise or | Grant Date | |||||||||||||||||
Granted | Employees In | Base Price | Expiration | Present Value | ||||||||||||||||
Name | (#) | Fiscal Year | ($/Sh) | Date | ($)(2) | |||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | |||||||||||||||
Wm. Michael Warren, Jr.
|
18,520 | (1) | 44.76 | % | $ | 42.75 | 1/27/14 | 263,169 | ||||||||||||
Geoffrey C. Ketcham
|
4,830 | (1) | 11.67 | % | $ | 42.75 | 1/27/14 | 68,634 | ||||||||||||
James T. McManus
|
5,070 | (1) | 12.25 | % | $ | 42.75 | 1/27/14 | 72,045 | ||||||||||||
Dudley C. Reynolds
|
3,260 | (1) | 7.88 | % | $ | 42.75 | 1/27/14 | 46,325 | ||||||||||||
J. David Woodruff
|
2,780 | (1) | 6.72 | % | $ | 42.75 | 1/27/14 | 39,504 |
Notes to Table 2
(1) | Date of exercisability is January 28, 2007. |
(2) | Reflects Black-Scholes valuation of $14.21 per share. For purposes of this valuation, the following assumptions were used: expected volatility of 32.72%, dividend yield of 1.81%, risk-free interest rate of 3.64% and a seven-year time of exercise. |
Table 3
Shares | Value of Unexercised In-the- | |||||||||||||||||||||||
Acquired | Value | Number of Unexercised | Money Options/SARs | |||||||||||||||||||||
on Exercise | Realized | Options/SARs at FY-End | at FY-End | |||||||||||||||||||||
Name | (#) | ($)(1) | (#) | ($)(2) | ||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | ||||||||||||||||||||
Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||||||||||
Wm. Michael Warren, Jr.
|
116,000 | 4,224,000 | 40,370 | 48,120 | 1,394,126 | 1,165,528 | ||||||||||||||||||
Geoffrey C. Ketcham
|
6,102 | 175,678 | 3,918 | 13,050 | 142,302 | 318,599 | ||||||||||||||||||
James T. McManus
|
7,020 | 247,910 | 0 | 13,720 | | 335,060 | ||||||||||||||||||
Dudley C. Reynolds
|
3,390 | 136,617 | 30,420 | 10,760 | 1,121,866 | 272,112 | ||||||||||||||||||
J. David Woodruff
|
1,000 | 40,600 | 26,200 | 8,550 | 898,594 | 213,751 |
Notes to Table 3
(1) | This column indicates the market value of the underlying securities at time of exercise minus the exercise price. |
(2) | This column indicates the market value of the underlying securities at the market price on December 31, 2004 ($58.95 per share) minus the exercise price. |
14
Table 4
Performance | Estimated Future Payouts Under | |||||||||||||||||||
Number of | or Other | Non-Stock Price-Based Plans | ||||||||||||||||||
Shares, Units or | Period Until | |||||||||||||||||||
Other Rights | Maturation or | Threshold | Target | Maximum | ||||||||||||||||
Name | (#) | Payout | (#) | (#) | (#) | |||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | |||||||||||||||
Wm. Michael Warren, Jr.
|
21,020 | N/A | 5,255 | 21,020 | 47,295 | |||||||||||||||
Geoffrey C. Ketcham
|
5,850 | N/A | 1,463 | 5,850 | 13,163 | |||||||||||||||
James T. McManus
|
6,140 | N/A | 1,535 | 6,140 | 13,815 | |||||||||||||||
Dudley C. Reynolds
|
4,610 | N/A | 1,153 | 4,610 | 10,373 | |||||||||||||||
J. David Woodruff
|
3,920 | N/A | 980 | 3,920 | 8,820 |
The grants listed in Table 4 above were all made under the 1997 Stock Incentive Plan. Each performance share granted is the equivalent of one share of our common stock. You can find more information about the 1997 Stock Incentive Plan on page 18 of this proxy statement under the caption 2004 Compensation Committee Report 1997 Stock Incentive Plan.
Retirement Income Plan
The Energen Corporation Retirement Income Plan, a defined benefit plan, covers our officers along with substantially all of our other employees. Our contributions to the plan on behalf of each of our executive officers are not reflected in the Summary Compensation Table, since the amount of the contribution with respect to a specified person is not and cannot readily be separately or individually calculated.
Our officers receive benefits under the plan based on years of service at retirement and on Final Earnings, the average base compensation for the highest sixty consecutive months out of the final 120 months of employment. (Average base compensation includes base salary only, and does not include bonus payments, payments in the form of contributions to other benefit plans or any other form of payment such as annual or long-term incentives.) Normal or delayed retirement benefits are payable upon retirement on the first day of any month following attainment of age 65 and continuing for life, subject to an annual cost-of-living increase of up to three percent. Section 415 of the Internal Revenue Code imposes limits on benefits payable to an employee under the plan.
We have entered into retirement supplement agreements (Supplemental Agreements) with certain officers, including each of the executive officers named in the Summary Compensation Table. Each Supplemental Agreement provides that the employee will receive a supplemental retirement benefit equal to the difference between 60% of the employees monthly compensation and the employees monthly retirement benefit under the Retirement Income Plan (including social security benefit). Generally, an employees compensation will be determined based on a formula taking into account the average of the highest 36 consecutive months of base salary during the five years prior to retirement plus the average of the three highest annual incentive awards for the ten full fiscal years prior to the earlier of (1) retirement or (2) the officers 61st birthday.
15
The following table presents estimated annual benefits payable from both the plan and the Supplemental Agreements upon normal or delayed retirement based on the assumptions shown. The amounts shown are subject to reduction for applicable Social Security benefits at age 62.
Pension Plan Table
Years of Service | ||||||||||||||||||||||||
Compensation | 15 | 20 | 25 | 30 | 35 | 40 | ||||||||||||||||||
$250,000
|
$ | 150,000 | $ | 150,000 | $ | 150,000 | $ | 150,000 | $ | 150,000 | $ | 150,000 | ||||||||||||
$300,000
|
$ | 180,000 | $ | 180,000 | $ | 180,000 | $ | 180,000 | $ | 180,000 | $ | 180,000 | ||||||||||||
$400,000
|
$ | 240,000 | $ | 240,000 | $ | 240,000 | $ | 240,000 | $ | 240,000 | $ | 240,000 | ||||||||||||
$450,000
|
$ | 270,000 | $ | 270,000 | $ | 270,000 | $ | 270,000 | $ | 270,000 | $ | 270,000 | ||||||||||||
$500,000
|
$ | 300,000 | $ | 300,000 | $ | 300,000 | $ | 300,000 | $ | 300,000 | $ | 300,000 | ||||||||||||
$600,000
|
$ | 360,000 | $ | 360,000 | $ | 360,000 | $ | 360,000 | $ | 360,000 | $ | 360,000 | ||||||||||||
$700,000
|
$ | 420,000 | $ | 420,000 | $ | 420,000 | $ | 420,000 | $ | 420,000 | $ | 420,000 |
The amount of base compensation and the years of service credited under the plan for individuals shown in the Summary Compensation Table are as follows: Mr. Warren, $610,000, 21 years; Mr. Ketcham, $315,000, 23 years; Mr. McManus, $340,000, 19 years; Mr. Reynolds, $280,000, 24 years and Mr. Woodruff, $250,000, 18 years.
Severance Compensation Agreements
We have entered into severance compensation agreements with Messrs. Warren, Ketcham, McManus, Reynolds and Woodruff, as well as nineteen other officers not named in the Summary Compensation Table and seven additional key employees. We designed the agreements to retain the executives and provide continuity of management in the event of any actual or threatened change in control of the Company. Generally, each such agreement provides that if, within thirty-six months following a change in control of the Company (as defined in the agreements), the employees employment is terminated in a qualified termination, then we will pay the employee an amount equal to a percentage of the employees (a) annual base salary in effect immediately prior to the change in control, plus (b) the employees highest additional cash compensation for the three fiscal years immediately prior to the fiscal year during which the change in control occurs. Under certain circumstances, the payment may be applicable to a termination which occurs during the period leading up to a change in control. The severance payment generally would be made in the form of a lump sum.
We established a four-tier structure in which tier-one employees receive 300% of such compensation, tier-two employees receive 200% of such compensation, tier-three employees receive 150% of such compensation and tier-four employees receive 100% of such compensation. Messrs. Warren, Ketcham, McManus, Reynolds and Woodruff are considered tier-one employees. The agreements also provide (1) the continuance of certain insurance and other employee benefits for a period of twenty-four months following any such termination of employment and (2) that if the executive receives payments that would be subject to the tax imposed by Section 4999 of the Internal Revenue Code, the executive shall be entitled to receive an additional payment in an amount necessary to put the executive in the same after-tax position as if such tax had not been imposed. For purposes of the agreements, (1) the term qualified termination means a termination (a) by the Company other than for cause, (b) by the employee for good reason or (c) by written agreement to such effect between the employee and the Company, (2) the term cause generally means failure to substantially perform duties, misconduct injurious to the Company or conviction of a felony, and (3) the term good reason generally means a reduction in the position, duties, responsibilities, status or benefits of the employees job. For purposes of tier-one, tier-two or tier-three employee agreements, the term qualified termination also includes any voluntary termination by the executive during the thirty-day period immediately following the first anniversary of a change in control.
16
2004 COMPENSATION COMMITTEE REPORT
The Officers Review Committee (ORC) of the Board of Directors is comprised entirely of outside Directors who are not officers or employees of the Company. The ORC is responsible for overseeing and administering the Companys executive compensation program. The ORC establishes the salaries and other compensation of the executive officers of the Company, including the Chairman and CEO and other executive officers named in the Summary Compensation Table (the Executive Officers).
Compensation Policy
The Companys executive compensation program is reviewed annually by the ORC and is designed to serve the interests of the Company and its shareholders by aligning executive compensation with shareholder objectives and by encouraging and rewarding management initiatives that will benefit the Company and its shareholders, customers, and employees over the long term. Specifically, the executive compensation program seeks to:
| attract and retain highly qualified executives by paying them competitively as compared with employers of comparable size and in similar lines of business; | |
| link a substantial portion of individual compensation to superior corporate performance as measured by specific objectives compared against a peer group; and | |
| align the interests of executives with the long-term interests of shareholders through payment of short- and long-term incentives in the form of common stock in the Company. |
The ORC strives to meet these objectives through a program comprised of salary, annual cash incentive awards, and long-term stock and performance share opportunities.
Salary. As a matter of policy, the ORC administers annual salary levels to ensure they remain competitive with the industry by utilizing available compensation surveys. Each year the ORC reviews the issue of competitive pay and adjusts salary structures accordingly with the midpoint of each pay range approximating the average of the market. The ORC then considers salary adjustments for the Companys executive officers, including those named in the Summary Compensation Table. The ORC approves salary adjustments based on the performance of each executive over the prior compensation period, recognition of individual contributions to overall Company performance, internal comparability considerations, as appropriate, and the executives placement in the salary range.
Annual Incentive Compensation. Executives are eligible each year for cash incentive awards under the Annual Incentive Compensation Plan. Awards are based upon attaining performance objectives established by the ORC. Assuming the performance objectives are met, the incentive award is based upon either a cash amount or a percentage of the salary earned by the participant during the performance year. The ORC establishes target awards and performance objectives for each performance period. The Annual Incentive Compensation Plan is designed so that all annual incentive compensation paid to executive officers will be deductible by us for federal income tax purposes. The Board of Directors may, in its discretion, award individual cash bonuses in addition to those paid under the Annual Incentive Compensation Plan. The deductibility of individual bonuses paid outside of the Annual Incentive Compensation Plan will depend on the specific circumstances.
Long-Term Incentive Compensation. We have in place the 1997 Stock Incentive Plan, which provides for the grant of stock options, restricted stock and performance shares. The present policy of the ORC is to use performance shares as the primary vehicle to deliver long-term incentives supplemented in certain circumstances by stock options and restricted stock. The Companys 1988 Stock Option Plan and 1992 Long-Range Performance Share Plan remain in effect for previously granted options and performance shares, but further grants are not available under these plans. The purpose of each of these plans is to provide executives and key employees an opportunity to participate in the long-term economic growth and performance of the Company. The ORC also administers the Companys Stock Appreciation Rights Plan which provides for the payment of cash incentives measured by long-term appreciation in the Companys stock. Although the Companys officers
17
1997 Stock Incentive Plan. The 1997 Stock Incentive Plan provides for the grant of performance share awards, stock options and restricted stock, or a combination thereof, to officers and key employees all as determined by the ORC.
A performance share is the value equivalent of one share of our common stock. An award of performance shares becomes payable if the ORC determines that all conditions of payment have been satisfied at the end of the applicable award period. Except as otherwise determined by the ORC at the time of grant, an award period will be the four-year period that commences on the first day of the fiscal year in which an award is granted. According to the performance condition guidelines previously adopted by the ORC and currently in effect under the plan, payment of an award will be based on the Companys percentile ranking with respect to total shareholder return among a comparison group of companies as measured for the applicable award or interim period.
The stock option provisions of the plan provide for the grant of incentive stock options, non-qualified stock options, stock appreciation rights and dividend equivalents or a combination thereof to officers and key employees, all as determined by the ORC. If an option includes stock appreciation rights, then the optionee may elect to cancel all or any portion of the option then subject to exercise, in which event our obligation in respect of such option may be discharged by payment of an amount in cash equal to the excess, if any, of the fair market value of the shares of common stock subject to such cancellation over the option exercise price for such shares. If the exercised option includes dividend equivalents, the optionee will, in addition to the shares of common stock purchased upon exercise, receive additional consideration in an amount equal to the amount of cash dividends which would have been paid on such shares had they been issued and outstanding during the period commencing with the option grant date and ending on the option exercise date, plus an amount equal to the interest that such dividends would have earned from the respective dividend payment dates if deposited in an account bearing interest compounded quarterly at the announced prime rate of AmSouth Bank in effect on the first day of the respective quarter.
The plan also provides for the grant of restricted stock. No shares of restricted stock may be sold or pledged until the restrictions on such shares have lapsed or have been removed. The ORC establishes as to each award of restricted stock the terms and conditions upon which the restrictions shall lapse, which terms and conditions may include a required period of service or individual or corporate performance conditions.
1992 Long-Range Performance Share Plan. The 1992 Long-Range Performance Share Plan provides for the grant of performance shares on terms similar to those described above with respect to the 1997 Stock Incentive Plan. As noted above, new performance share grants are not available under the 1992 Long-Range Performance Share Plan; however, the plan remains in effect with respect to previously granted performance shares.
1988 Stock Option Plan. The 1988 Stock Option Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights and dividend equivalents or a combination thereof, on terms similar to those described above with respect to the 1997 Stock Incentive Plan. As noted above, new stock option grants are not available under the 1988 Stock Option Plan; however, it remains in effect with respect to previously granted stock options.
1997 Deferred Compensation Plan. Under the Companys 1997 Deferred Compensation Plan, officers may elect to defer part or all of any one or more of the following items of compensation to the extent such item of compensation is applicable to the officer: (a) base salary; (b) annual incentive compensation plan awards; (c) grants under the 1988 Stock Option Plan; (d) awards under the 1997 Stock Incentive Plan; and (e) awards under the 1992 Long-Range Performance Share Plan. Amounts deferred by a participant under the Deferred Compensation Plan are credited to one of two separate accounts maintained for a participant, a Company stock account or an investment account. The value of a participants Company stock account tracks the performance of our common stock, including reinvestment of dividends. At distribution, the participants Company stock account is payable in the form of shares of Company common stock. The value of a
18
Operating Summary
As demonstrated in the plan descriptions provided, the ORC links executive compensation directly to objective performance criteria of the Company, subsidiaries where applicable, and the individual executives performance. By doing so, the ORC creates an environment which encourages long-term decisions which will benefit us, our shareholders, customers, and employees and at the same time allow those executives, managers, and other key employees within the Company to share in the success of those decisions and actions.
Issues Influencing Compensation Decisions During the Reporting Year (January 1, 2004 to December 31, 2004)
During 2004 the Company had net income of $127.5 million (a 15.2% increase over the prior year), earnings per diluted share of $3.49 (a 12.6% increase over the prior year), total shareholder return of 46%, and a 3.4% dividend increase. As of December 31, 2004, the Company had a five year annual earnings per share growth rate of 17.5% and twenty-two years of consecutive annual dividend increases. The ORC considered these and other factors in funding the incentive program, adjusting salaries, and approving payouts under the 1992 Long-Range Performance Share Plan and 1997 Stock Incentive Plan. Specifically, the ORC considered the Companys total shareholder return and earnings results for the year and evaluated the Companys total shareholder return performance against a peer group of energy and gas distribution companies.
Wm. Michael Warren, Jr. has served as the Companys Chief Executive Officer since 1997 and as its Chairman of the Board since January 1, 1998. Mr. Warrens base salary was adjusted to $575,000 effective January 1, 2004, reflecting continuing efforts to meet market levels for the Chief Executive Officer position. The ORC expects to continue to place a substantial percentage of the total compensation package at risk through the annual cash incentive plan and through the Companys stock performance by awards of stock options, restricted stock and performance shares. For the 2004 year, Mr. Warren earned a cash incentive award of $690,000, reflecting the performance of the Company, its subsidiaries, and the incumbent himself in achieving the financial and business results of the Company. He also earned a performance share payout for the four year award period ended September 30, 2004 valued at $1,300,000. Restricted stock was granted in accordance with plan provisions and the stated compensation policy. Performance share awards were made based on a percentage of salary with the applicable percentage being a function of an executives position with the Company. Actual payout is dependent on obtaining performance levels in accordance with previously described guidelines.
OFFICERS REVIEW COMMITTEE: | |
Julian W. Banton, Chair | |
James S. M. French | |
T. Michael Goodrich | |
Stephen A. Snider |
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PERFORMANCE GRAPH (1)
Energen Corporation Comparison of Five-Year
This graph compares our total shareholder returns (assuming reinvestment of dividends), the Standard & Poors Composite Stock Index (S&P 500), and two industry peer indices compiled by us that consist of several companies (Peer Groups A and B). Peer Group B is a replacement index for Peer Group A. The graph assumes $100 invested at the per-share closing price of the common stock on the New York Exchange Composite Tape on September 30, 1999, in the Company and each of the indices.
Growth of $100 Invested in 1999
September 30, | September 30, | September 30, | December 31, | December 31, | December 31, | December 31, | ||||||||||||||||||||||
1999 | 2000 | 2001 | 2001(2) | 2002 | 2003 | 2004 | ||||||||||||||||||||||
S&P 500 Index
|
$ | 100 | $ | 113 | $ | 83 | $ | 92 | $ | 72 | $ | 92 | $ | 102 | ||||||||||||||
Energen
|
$ | 100 | $ | 152 | $ | 118 | $ | 130 | $ | 158 | $ | 227 | $ | 331 | ||||||||||||||
Peer Group A(3)
|
$ | 100 | $ | 126 | $ | 125 | $ | 135 | $ | 136 | $ | 168 | $ | 211 | ||||||||||||||
Peer Group B(3)
|
$ | 100 | $ | 124 | $ | 119 | $ | 131 | $ | 144 | $ | 181 | $ | 234 |
Notes to PERFORMANCE GRAPH
(1) | Total shareholder return includes reinvested dividends. |
(2) | During 2001, we changed our fiscal year end from September 30 to December 31, and consequently we have a three-month period ended December 31, 2001 to report separately. |
(3) | The Peer Group A and B indices include the companies listed in the following table and, unless otherwise indicated by reference to specific years, each company is included for each fiscal year. |
Company Name | ||||||||
) | ||||||||
Peer Group(s | ||||||||
AGL Resources Inc
|
A | B | ||||||
Atmos Energy Corp
|
A | B | ||||||
Avista Corp
|
A | |||||||
Cabot Oil & Gas Group
|
A | B | ||||||
Cascade Natural Gas Corp
|
A | |||||||
Chesapeake Energy Corporation
|
B | |||||||
Comstock Resources
|
B | |||||||
Denbury Resources Inc
|
B | |||||||
Encore Acquisition (Oct. 2001-2004)
|
B |
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Company Name | ||||||||
) | ||||||||
Peer Group(s | ||||||||
Energy East Corporation
|
A | B | ||||||
Equitable Resources Inc
|
A | B | ||||||
KeySpan Corporation
|
A | B | ||||||
Kinder Morgan Inc
|
A | |||||||
The Laclede Group
|
A | B | ||||||
MDU Resources Group Inc
|
A | B | ||||||
MGE Energy Inc
|
A | |||||||
National Fuel Gas Co
|
A | B | ||||||
New Jersey Resources
|
A | B | ||||||
Nicor Inc
|
A | B | ||||||
Northwest Natural Gas Co
|
A | B | ||||||
NUI Corp (2000-2003)
|
A | |||||||
Oneok Inc
|
A | B | ||||||
Peoples Energy Corp
|
A | B | ||||||
Piedmont Natural Gas Co
|
A | B | ||||||
Pure Resources Inc (2001)
|
A | |||||||
Questar Corp
|
A | B | ||||||
Quicksilver Resources Inc
|
B | |||||||
Range Resources Corporation
|
B | |||||||
Scana Corp
|
A | B | ||||||
Semco Energy Inc
|
A | |||||||
South Jersey Industries Inc
|
A | B | ||||||
Southern Union Company
|
A | |||||||
Southwest Gas Corp
|
A | B | ||||||
Southwestern Energy Company
|
A | B | ||||||
St. Mary Land & Exploration
|
B | |||||||
Teco Energy Inc
|
A | |||||||
UGI Corp
|
A | B | ||||||
Vectren Corporation
|
A | B | ||||||
WGL Holdings Inc
|
A | B | ||||||
Wisconsin Energy Corp
|
A | B | ||||||
XTO Energy Inc
|
A | B |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our executive officers, Directors and persons who own more than 10% of our common stock, to file initial reports of ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the Securities and Exchange Commission, and to provide us with copies of all forms filed.
In April 2004, it was discovered that, due to a clerical error, the acquisition by Mr. Wm. Michael Warren, Jr. under the Companys Deferred Compensation Plan of certain deferred shares had not been reported for the months of January, February and March. Accordingly, the acquisitions of these shares were reported late on the Form 4 filed on Mr. Warrens behalf on May 3, 2004. Mr. Dudley C. Reynolds filed a Form 4 on August 26, 2004 (which Form 4 was amended on August 27, 2004), to report a sale of shares that occurred on August 16, 2004. Additionally, Mr. Reynolds filed an amended Form 4 on December 29, 2004 to report the correct amount of shares disposed of as initially reported on a Form 4 dated December 27, 2004. We believe, based on a review of Forms 3, 4 and 5 furnished to us, that, during fiscal 2004, our executive officers, Directors and 10% shareholders complied in full with all applicable Section 16(a) filing requirements with the exception of the above instances with respect to Mr. Warren and Mr. Reynolds.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP audited our financial statements for the fiscal year ended December 31, 2004, and the Board of Directors intends to continue the services of this firm for the fiscal year ending December 31, 2005. A representative of PricewaterhouseCoopers LLP will be present at the Annual Meeting, will have an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.
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Fee Disclosure
The following table presents fees billed or expected to be billed for professional audit services rendered by PricewaterhouseCoopers LLP for the audit of the Companys annual financial statements for the years ended December 31, 2004 and December 31, 2003, and fees billed for other services rendered by PricewaterhouseCoopers LLP during those periods.
2003 | 2002 | |||||||
(1) Audit fees
|
$ | 1,098,694 | $ | 405,070 | ||||
(2) Audit-related fees(a)
|
$ | 497,187 | $ | 163,128 | ||||
(3) Tax fees(b)
|
$ | 265,414 | $ | 156,236 | ||||
(4) All other fees
|
0 | $ | 1,250 |
(a) | Includes fees for audits of certain of the Companys employee benefit plans, review of Sarbanes 404 readiness, data management and security review, and review of the application of accounting standards. | |
(b) | Includes fees incurred in connection with the Companys tax returns and review of certain tax issues. |
Our Audit Committee concluded that the provision of such services by PricewaterhouseCoopers LLP was compatible with the maintenance of that firms independence in the conduct of its auditing functions.
In April 2004 our Audit Committee pre-approved the engagement through June 30, 2005 of the independent auditors with respect to the following services: (i) services necessary to perform the audit or review of the Companys financial statements; (ii) audit-related services such as employee benefit plan audits, due diligence related to mergers and acquisitions, accounting assistance and internal control reviews; and (iii) tax services including preparation and/or review of, and consultation and advice with respect to tax returns and reports; claims for tax refund; tax payment planning services; tax implications of changes in accounting methods and applications for approval of such changes; tax basis studies; tax implications of mergers and acquisitions; tax issues relating to payroll; tax issues relating to employee benefit plans; requests for technical advice from tax authorities and tax audits and appeals (not including representation before a tax court, district court or federal court of claims or a comparable state or local court). In addition, the Chairman of the Audit Committee has been delegated the authority by the Audit Committee to pre-approve the engagement of the independent auditors for services not covered by the above authority. All such pre-approvals must be reported to the Audit Committee at the next committee meeting.
[The Audit Committee Report for 2004 has not yet been finalized, but will be complete prior to filing of the definitive proxy statement.]
[2004 AUDIT COMMITTEE REPORT
In compliance with the requirements of the New York Stock Exchange (NYSE), the Audit Committee has a formal written charter approved by the Board of Directors, a copy of which is available on our website under the heading Investors and subheading Corporate Governance (www.energen.com). The Audit Committee performs an annual review and reassessment of the adequacy of the Audit Committee charter. In connection with the performance of its responsibility under its charter, the Audit Committee has:
| Reviewed and discussed the audited financial statements of the Company with management; | |
| Discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61 (required communication by external auditors with audit committees); | |
| Received from the independent auditors disclosures regarding the auditors independence required by Independence Standards Board Standard No. 1 and discussed with the auditors the auditors independence; and |
22
| Recommended, based on the review and discussion noted above, to the Board of Directors that the audited financial statements be included in the Companys Annual Report on Form 10-K for the year ended December 31, 2004 for filing with the Securities and Exchange Commission. |
The Audit Committee has also considered whether the independent public accountants provision of non-audit services to the Company is compatible with maintaining their independence.
AUDIT COMMITTEE | |
Julian W. Banton, Chair | |
James S. M. French | |
T. Michael Goodrich | |
Judy M. Merritt | |
David W. Wilson] |
SHAREHOLDER PROPOSALS
To be included in our proxy statement and form of proxy, proposals of shareholders intended to be presented at the 2006 Annual Meeting must be received at the Companys principal executive officers no later than November 24, 2005. If a shareholder desires to bring other business before the 2006 Annual Meeting without including such proposal in the Companys proxy statement, the shareholder must notify the Company in writing on or before February 7, 2006. Shareholder proposals should be directed to J. David Woodruff, Secretary, Energen Corporation, 605 Richard Arrington Jr. Blvd. North, Birmingham, Alabama 35203-2707.
COSTS OF PROXY SOLICITATION
The entire cost of soliciting proxies on behalf of the Board of Directors will be borne by the Company, including the expense of preparing, printing and mailing this proxy statement. In addition to mailing proxies to shareholders, we may solicit proxies by personal interview or by telephone and telegraph. We will request brokerage houses and other custodians and fiduciaries to forward at our expense soliciting materials to the beneficial owners of stock held of record by them. We have engaged Georgeson & Co. of New York to assist in the solicitation of proxies of brokers and financial institutions and their nominees. This firm will be paid a fee of $7,500, plus out-of-pocket expenses.
ENERGEN CORPORATION | |
Chairman of the Board |
Birmingham, Alabama
23
_______________________________________________________
605 Richard Arrington Jr. Blvd. North
PROXY ENERGEN CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 2005
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ENERGEN CORPORATION
P
R O X Y |
The undersigned, revoking all proxies heretofore given with respect to the shares represented hereby, hereby appoints WM. MICHAEL WARREN, JR. and J. DAVID WOODRUFF, or either of them acting in the absence of the other, with full power of substitution, proxies to represent the undersigned at the Annual Meeting of Shareholders of Energen Corporation (the Company), to be held on April 27, 2005 at 10:00 a.m., CDT, at the principal office of the Company in Birmingham, Alabama, and at any adjournments thereof (the Annual Meeting), respecting the shares of Common Stock which the undersigned would be entitled to vote if then personally present, as follows: |
SEE REVERSE SIDE |
This proxy should be mailed in the enclosed addressed envelope (no postage required if mailed in the United States). To assure the necessary representation at the Annual Meeting, please date and sign this proxy and mail it to the Company promptly. Please mail your proxy to the Company even though you plan to attend the Annual Meeting. If you vote in person at the Annual Meeting, your Proxy will not be used.
Dividend Reinvestment and Direct Stock Purchase Plan
Energen Corporation offers shareholders and other investors the opportunity to purchase Energen common stock directly, without incurring fees and commissions. This plan is offered through a prospectus available from the Plan Administrator, EquiServe Trust Company, N.A., by calling 1-800-946-4316 or 1-800-654-3206. Enrollment material also is available on the World Wide Web at http://www.equiserve.com.
Shareholder Assistance: 1-888-764-5603
This automated voice response system is available 24 hours a day, seven days a week for the convenience of Energen Corporation shareholders. Customer service representatives are available from 9:00 a.m. to 5:00 p.m. Eastern time, Monday through Friday, to assist shareholders with account balances, dividend information, transfer instructions, and sale or certificate information.
Energen on the Web
Interested parties with Internet access may review Energen corporate information, including news releases and annual reports, on Energens home page at www.energen.com.
x
|
Please mark your votes as in this example. |
FOR ALL NOMINEES |
WITHHOLD AUTHORITY FOR ALL NOMINEES |
FOR ALL NOMINEES (except as noted below) |
Nominees for three-year term ending 2008: | |||||||||||
1. Election of Directors.
|
o | o | o | 01. J. Mason Davis, Jr. 02. James S.M. French 03. David W. Wilson |
3. | In their discretion, to vote upon such other matters as may come before the Annual Meeting. | ||||||||
(To withhold authority for
any individual nominee, write that nominees name in the space provided below.) |
||||||||||||||
2.
Proposal to amend the Companys Restated Certificate of
Incorporation to increase the Companys authorized shares of
common stock from 75,000,000 to 150,000,000 shares as discussed in
the Companys Proxy Statement with respect to the Annual
Meeting. |
All as such items or proposals are more fully set forth in the Companys Proxy Statement with respect to the Annual Meeting received by the undersigned. THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFIC INDICATIONS ABOVE. IN THE ABSENCE OF SUCH INDICATIONS, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AND FOR THE PROPOSAL TO AMEND THE COMPANYS RESTATED CERTIFICATE OF INCORPORATION. | |||||||||||||||
FOR |
AGAINST | ABSTAIN | ||||||||||||||
o | o | o | |
|||||||||||||
SIGNATURE(S)
|
DATE |
Annual Meeting of Shareholders
Wednesday, April 27, 2005, at 10:00 a.m. CDT
Energen Corporation Headquarters
605 Richard Arrington, Jr. Blvd N
Birmingham, Alabama