SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
SPINNAKER EXPLORATION COMPANY
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
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[ ] 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.
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[Spinnaker Exploration Company Logo]
SPINNAKER EXPLORATION COMPANY
Houston, Texas
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Tuesday, May 7, 2002
To the Stockholders:
The 2002 Annual Meeting of Stockholders (the "Annual Meeting") of Spinnaker
Exploration Company (the "Company" or "Spinnaker") will be held on Tuesday,
May 7, 2002, at 9:00 a.m., local time, at the DoubleTree Hotel at Allen
Center, 400 Dallas Street at Bagby, Houston, Texas, for the following
purposes:
(1) To elect seven directors to serve until the 2003 Annual Meeting of
Stockholders;
(2) To ratify the selection of KPMG LLP as independent public accountants
of the Company for the fiscal year ending December 31, 2002; and
(3) To transact such other business as may properly come before such
meeting or any adjournment(s) thereof.
The close of business on March 15, 2002 has been fixed as the record date
for the determination of stockholders entitled to receive notice of and to
vote at the Annual Meeting or any adjournment(s) thereof.
You are cordially invited to attend the Annual Meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, WE ASK THAT YOU SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors
/s/ ROBERT M. SNELL
Robert M. Snell
Secretary
April 10, 2002
[Spinnaker Exploration Company Logo]
SPINNAKER EXPLORATION COMPANY
1200 Smith Street, Suite 800
Houston, Texas 77002
(713) 759-1770
----------------
PROXY STATEMENT
----------------
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors
of the Company (the "Board of Directors") for use at the Annual Meeting to be
held on Tuesday, May 7, 2002, at 9:00 a.m., local time, at the DoubleTree
Hotel at Allen Center, 400 Dallas Street at Bagby, Houston, Texas or at any
adjournment(s) thereof. The solicitation of proxies by the Board of Directors
will be conducted primarily by mail. In addition, officers, directors and
employees of the Company may solicit proxies personally or by telephone,
telegram or other forms of wire or facsimile communication. The Company will
reimburse brokers, custodians, nominees and fiduciaries for reasonable
expenses incurred by them in forwarding proxy material to beneficial owners of
common stock of the Company ("Common Stock"). The costs of the solicitation
will be borne by the Company. This proxy statement and the form of proxy were
first mailed to stockholders of the Company on or about April 11, 2002.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy (a) by execution and submission of a
revised proxy, (b) by written notice to the Secretary of the Company or (c) by
voting in person at the Annual Meeting. In the absence of such revocation,
shares represented by the proxies will be voted at the Annual Meeting.
At the close of business on March 15, 2002, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were 27,385,316 outstanding shares of Common Stock. Each
stockholder is entitled to one vote for each share of Common Stock. The Common
Stock is the only class of outstanding securities of the Company entitled to
notice of and to vote at the Annual Meeting. In order to transact business at
the Annual Meeting, a quorum consisting of a majority of all outstanding
shares entitled to vote must be present or represented by proxy. Abstentions
and proxies returned by brokerage firms for which no voting instructions have
been received from their principals will be counted for the purpose of
determining whether a quorum is present.
The Company's annual report to stockholders for the year ended December 31,
2001, including financial statements, is being mailed with the enclosed proxy
to all stockholders entitled to vote at the Annual Meeting. The annual report
does not constitute a part of the proxy soliciting material.
ELECTION OF DIRECTORS
(Proposal One)
Seven directors are to be elected at the Annual Meeting. The nominees for
election as directors are Roger L. Jarvis, Sheldon R. Erikson, Jeffrey A.
Harris, Michael E. McMahon, Howard H. Newman, Michael G. Morris and Michael E.
Wiley. If elected, each director will serve until the Company's 2003 Annual
Meeting of Stockholders and until his successor shall have been elected and
qualified. Each of the nominees for director
1
currently serves as a director of the Company. All of the directors are
required to stand for election at the Annual Meeting because directors hold
annual terms. 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 is required to elect a director. Accordingly, abstentions and "broker
non-votes" would have the same effect as a vote against a director. A broker
non-vote occurs if a broker or other nominee does not have discretionary
authority and has not received instructions with respect to a particular item.
Stockholders may not cumulate their votes in the election of directors.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the election of the nominees listed below.
Although the Board of Directors does not contemplate that any of the nominees
will be unable to serve, if such a situation arises prior to the Annual
Meeting, the persons named in the enclosed proxy will vote for the election of
such other person(s) as may be nominated by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF
THE ABOVE NOMINEES.
The following table sets forth information as to each nominee regarding
their name, age as of March 15, 2002, principal occupation, other
directorships in certain companies held by them and the length of their
continuous service as a director of the Company.
Director
Nominees Principal Occupation and Directorships Since Age
-------- -------------------------------------- -------- ---
Roger L. Jarvis......... Chairman of the Board, President and Chief Executive 1996 48
Officer of the Company; Director, National-Oilwell,
Inc.
Jeffrey A. Harris....... Senior Managing Director, Warburg Pincus LLC; Partner, 1996 46
Warburg Pincus & Co.; Director, ECsoft Group plc,
Industri-Matematik International Corp. and Knoll, Inc.
Howard H. Newman........ Vice Chairman, Warburg Pincus LLC; Partner, Warburg 1996 54
Pincus & Co.; Director, ADVO, Inc., Cox Insurance
Holdings, Plc, EEX Corporation, Encore Acquisition
Company and Newfield Exploration Company
Michael E. McMahon...... Partner, RockPort Partners LLC 1999 54
Sheldon R. Erikson...... Chairman of the Board, President and Chief Executive 2000 60
Officer, Cooper Cameron Corporation; Director, Layne
Christensen Co., NCI Building Systems, Inc., Petroleum
Equipment Suppliers Association and American Petroleum
Institute
Michael G. Morris....... Chairman of the Board, President and Chief Executive 2001 55
Officer, Northeast Utilities; Director, Institute of
Nuclear Power Operations, Nuclear Energy Institute,
Edison Electric Institute, Association of Edison
Illuminating Companies, American Gas Association,
Nuclear Electric Insurance Limited, Connecticut
Business & Industry Association and Webster Financial
Corporation
Michael E. Wiley........ Chairman of the Board, President and Chief Executive 2001 51
Officer, Baker Hughes Incorporated; Director, American
Petroleum Institute
Each of the nominees has been engaged in the principal occupation set forth
opposite his name for the past five years except as follows:
Mr. McMahon was a Managing Director of Chase Securities, Inc. from July
1997 to June 1998. From October 1994 until July 1997, Mr. McMahon was a
Managing Director of Lehman Brothers.
2
Mr. Morris was President and Chief Executive Officer of Consumers Energy
Company, a subsidiary of CMS Energy Corporation, from 1994 to 1997.
Mr. Wiley was President and Chief Operating Officer of Atlantic Richfield
Company (ARCO) from 1998 through May 2000. Prior to 1998, Mr. Wiley served as
Chairman, President and Chief Executive Officer of Vastar Resources, Inc.
Directors' Meetings and Committees of the Board of Directors
The Board of Directors held five meetings during 2001 and executed two
unanimous consents in lieu of meetings. During 2001, each of the directors,
except Mr. Erikson, attended at least 75 percent of the aggregate of (i) the
total number of meetings of the Board of Directors held during the period that
such director served as a director and (ii) the total number of meetings held
by each committee of the Board of Directors on which such director served
during the period that such director so served. The Board of Directors has the
following standing committees:
Audit Committee. The Audit Committee, which consists of Messrs. McMahon,
Morris and Wiley, met six times during 2001. Mr. McMahon serves as Chairman of
the Audit Committee. All current members of the Audit Committee are
independent as defined by the listing standards of the New York Stock
Exchange. The Audit Committee is responsible for:
. overseeing the quality of quarterly and annual financial reporting;
. selecting, evaluating and, where appropriate, replacing the independent
public accountants and ensuring their independence;
. consulting with the independent public accountants regarding the plan of
audit, the report on the audit, the scope of their work and the quality
of their performance;
. reviewing significant developments in accounting rules, issues involving
judgment and affecting quality, proposed changes in methods of
accounting or consolidated financial statements and adequacy of internal
accounting controls;
. reviewing the selection, application and disclosure of critical
accounting policies and having proactive discussions with management and
the independent public accountants about these critical accounting
policies;
. overseeing and improving the process through which the Company
identifies and controls business and financial reporting risks;
. reviewing internal control systems intended to ensure the reliability of
financial reporting and compliance with applicable laws and regulations;
and
. reviewing the establishment and maintenance of an environment that
promotes ethical behavior and compliance with policies and procedures.
The Board of Directors adopted the Audit Committee Charter in 2000. The
Audit Committee has performed its annual review and assessment of the Audit
Committee Charter. A copy of the Audit Committee Charter is attached hereto as
Appendix A.
Compensation Committee. The Compensation Committee, which consists of
Messrs. Harris, Erikson and Wiley, met twice during 2001. Mr. Harris is the
Chairman of the Compensation Committee. The Compensation Committee is
responsible for:
. administering and granting awards under all equity plans;
. reviewing the compensation of the Company's Chief Executive Officer and
recommendations of the Chief Executive Officer as to appropriate
compensation for the other executive officers and key personnel;
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. examining periodically the Company's general compensation structure; and
. supervising the Company's welfare and pension plans and compensation
plans.
Risk Management Committee. The Risk Management Committee, which consists of
Messrs. Jarvis, Harris, McMahon and Morris, met twice during 2001. Mr. Jarvis
is the Chairman of the Risk Management Committee. The Risk Management
Committee is responsible for monitoring the hedging program and adherence to
the hedging policy.
The Board of Directors currently has no nominating committee or committee
performing a similar function.
Compensation of Directors
Prior to 2001, non-employee directors unaffiliated with Warburg, Pincus
Ventures, L.P. ("Warburg") were granted options pursuant to the Company's
equity plans to purchase 16,000 shares of Common Stock at fair market value,
as defined, upon appointment to the Board of Directors, with 20 percent
vesting on the date of grant and 20 percent vesting on each anniversary of the
grant date. These directors were also awarded a variable number of options to
purchase Common Stock at fair market value, as defined, annually on the date
of previously-held annual meetings of stockholders, with 100 percent vesting
on the date of grant.
In May 2001, the Board of Directors adopted and approved the Director
Compensation Plan, which includes the following provisions:
. Upon appointment or election to the Board of Directors, each outside
director of the Company shall receive options to purchase 20,000 shares
of Common Stock under the terms of one of the Company's equity incentive
plans then in effect with an exercise price equal to the fair market
value of the Common Stock on the date of the grant. Each non-employee
director of the Company unaffiliated with Warburg who received options
to purchase shares of Common Stock prior to the adoption of the Director
Compensation Plan received options to purchase an additional 4,000
shares of Common Stock. Such additional options to purchase 4,000 shares
of Common Stock vested 20 percent on the date of the grant and will vest
20 percent on each anniversary of the date of the grant.
. Each non-employee director of the Company unaffiliated with Warburg may
select to receive either (i) annual director fees of $24,000 payable in
quarterly installments of $6,000 or (ii) an option to purchase shares of
Common Stock, granted on or about the date of each annual meeting of
stockholders of the Company, equivalent to a payment of $24,000 using
the Black-Scholes option pricing model as of the date of the grant. Such
options will be awarded under the terms of one of the Company's equity
plans then in effect with an exercise price equal to the fair market
value of the Common Stock on the date of the grant. Such options to
purchase shares of Common Stock shall vest 100 percent on the date of
the grant.
. Warburg has requested one allocation of each option grant under the
Director Compensation Plan to be divided equally between Messrs. Harris
and Newman for the ultimate benefit of Warburg.
. Each non-employee director of the Company unaffiliated with Warburg will
receive a meeting fee of $500.00. In addition, each non-employee
director who also serves as a Committee Chairman will receive an
additional $500.00 for each Committee meeting held outside a regular
meeting of the Board of Directors. Warburg has requested that one
allocation of meeting fees be paid to Mr. Harris for the ultimate
benefit of Warburg. No compensation will be paid for executing a
unanimous consent of directors.
In 2001, the Compensation Committee granted options to directors under the
Director Compensation Plan to purchase 74,000 shares of Common Stock as
follows:
. 4,000, 10,000, 4,000, 20,000, 10,000 and 20,000 options to purchase
shares of Common Stock to Messrs. Erikson, Harris, McMahon, Morris,
Newman and Wiley, respectively, with 20 percent vesting on the date of
grant and 20 percent vesting on each anniversary of the grant date;
4
. 1,200, 600, 1,200, 1,200, 600 and 1,200 options to purchase shares of
Common Stock, to Messrs. Erikson, Harris, McMahon, Morris, Newman and
Wiley, respectively, with 100 percent vesting on the date of grant.
Non-employee directors are also reimbursed for out-of-pocket expenses
incurred to attend board and committee meetings.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, unless otherwise
indicated, as of March 15, 2002, regarding beneficial ownership of Common
Stock by (i) each person known by the Company to own beneficially five percent
or more of its outstanding Common Stock, (ii) the Company's Chief Executive
Officer and each of the Company's other four most highly compensated executive
officers, (iii) each director and (iv) all executive officers and directors as
a group.
Beneficial Ownership(4)
---------------------------
Name of Beneficial Owner Shares Percent
------------------------ -------------- ------------
Warburg, Pincus Ventures, L.P. (1) (2)............. 6,800,585 24.8%
FMR Corp. (3)...................................... 1,614,540 5.9
Roger L. Jarvis.................................... 1,057,093 3.7
William D. Hubbard................................. 245,297 *
Robert M. Snell.................................... 104,223 *
L. Scott Broussard................................. 96,034 *
Kelly M. Barnes.................................... 166,387 *
Sheldon R. Erikson................................. 14,500 *
Jeffrey A. Harris (2).............................. 6,805,185 24.8
Michael E. McMahon................................. 33,430 *
Michael G. Morris.................................. 9,200 *
Howard H. Newman (2)............................... 6,805,185 24.8
Michael E. Wiley................................... 9,200 *
Executive officers and directors as a group
(consisting of 13 persons) (2).................... 8,642,293 29.7
--------
* Represents beneficial ownership of less than one percent.
(1) The stockholder is Warburg, Pincus Ventures, L.P. Warburg Pincus & Co. is
the sole general partner of Warburg. Warburg is managed by Warburg Pincus
LLC. Lionel I. Pincus is the managing partner of Warburg Pincus & Co. and
the managing member of Warburg Pincus LLC and may be deemed to control
both entities. The address of the Warburg Pincus entities is 466 Lexington
Avenue, New York, New York 10017.
(2) Messrs. Harris and Newman, directors of Spinnaker, are partners of Warburg
Pincus & Co. Mr. Newman is Vice Chairman and Mr. Harris is Senior Managing
Director of Warburg Pincus LLC. Of the total shares indicated as owned by
Messrs. Harris and Newman, 6,800,585 shares are included because of their
affiliation with the Warburg Pincus entities. Messrs. Harris and Newman
disclaim beneficial ownership of all shares owned by the Warburg Pincus
entities.
(3) The stockholder is FMR Corp. The address of FMR Corp. is 82 Devonshire
Street, Boston, Massachusetts 02109. According to Schedule 13G, dated
February 14, 2002, filed with the Securities and Exchange Commission
jointly by FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson, Mr.
Johnson is Chairman and Ms. Johnson is a director of FMR Corp. and may be
deemed to be members of a controlling group with respect to FMR Corp. The
Schedule 13G indicates that at December 31, 2001, (i) Fidelity Management
& Research Company ("Fidelity"), a wholly-owned subsidiary of FMR Corp.,
was the beneficial owner of 1,196,340 shares of Common Stock in its
capacity as investment adviser to various registered investment companies
(the "Fidelity Funds") (the power to vote such shares resides solely with
the boards of trustees of the Fidelity Funds, while the power to dispose
of such shares resides with Mr. Johnson, FMR Corp. (through its control of
Fidelity) and the Fidelity Funds); (ii) Fidelity Management Trust Company
("Fidelity
5
Management"), a bank that is wholly-owned by FMR Corp., was the beneficial
owner of 318,200 shares of Common Stock (the power to vote and dispose of
318,200 of such shares resides with Mr. Johnson and FMR Corp. (through its
control of Fidelity Management)); and (iii) Fidelity International Limited,
an investment adviser to various investment companies of which Mr. Johnson
is chairman but which is managed independently from FMR Corp., was the
beneficial owner of 100,000 shares of Common Stock. FMR Corp. and Fidelity
International Limited each disclaim beneficial ownership of Common Stock
beneficially owned by the other.
(4) Pursuant to the rules and regulations promulgated under the Securities
Exchange Act of 1934, shares are deemed to be "beneficially owned" by a
person if he directly or indirectly has or shares the power to vote or
dispose of such shares, whether or not he has any pecuniary interest in
such shares, or if he has the right to acquire the power to vote or
dispose of such shares within 60 days, including any right to acquire such
power through the exercise of any option, warrant or right. The shares
beneficially owned by Messrs. Jarvis, Hubbard, Barnes, Broussard, Snell,
Erikson, Harris, McMahon, Morris, Newman and Wiley include 958,017,
222,176, 155,756, 94,079, 104,000, 14,500, 4,600, 15,100, 9,200, 4,600 and
9,200 shares, respectively, that may be acquired by such persons within 60
days through the exercise of stock options. The shares owned by the
executive officers and directors as a group include 1,683,899 shares that
may be acquired by such persons within 60 days through the exercise of
stock options.
Section 16 Requirements
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who own more than 10 percent of the Common
Stock to file reports of ownership and changes in ownership concerning the
Common Stock with the Securities and Exchange Commission and to furnish the
Company with copies of all Section 16(a) forms they file. Based upon the
Company's review of the Section 16(a) filings that have been received by the
Company, the Company believes that all filings required to be made under
Section 16(a) during 2001 were timely made.
MANAGEMENT
The following table sets forth certain information with respect to the
executive officers of the Company as of March 15, 2002. The Company's
executive officers serve at the discretion of the Board of Directors.
Name Age Position
---- --- --------
Roger L. Jarvis......... 48 Chairman of the Board, President and Chief Executive Officer
Robert M. Snell......... 46 Vice President, Chief Financial Officer and Secretary
William D. Hubbard...... 58 Vice President--Exploration
L. Scott Broussard...... 44 Vice President--Drilling and Production
Kelly M. Barnes......... 48 Vice President--Land
Jimmy W. Bennett........ 55 Vice President--Systems Technology and Processing
Jeffrey C. Zaruba....... 37 Vice President, Treasurer and Assistant Secretary
Roger L. Jarvis has served as President, Chief Executive Officer and
Director of Spinnaker since 1996 and as Chairman of the Board of Spinnaker
since 1998. From 1986 to 1994, Mr. Jarvis served in various capacities with
King Ranch Inc. and its subsidiary, King Ranch Oil and Gas, Inc., including
Chief Executive Officer, President and Director of King Ranch Inc. and Chief
Executive Officer and President of King Ranch Oil and Gas, Inc., where he
expanded its activities in the Gulf of Mexico. Mr. Jarvis is a director of
National-Oilwell, Inc.
Robert M. Snell has served as Vice President, Chief Financial Officer and
Secretary of Spinnaker since December 2000. From 1983 to 2000, Mr. Snell
served in various capacities with Bank of America and its predecessors, most
recently as a Managing Director of Banc of America Securities LLC, focused on
the energy sector.
6
William D. Hubbard has served as Vice President--Exploration of Spinnaker
since 1996. From 1992 to 1996, Mr. Hubbard served as Senior Vice President--
Exploration of Global Natural Resources Corporation and its affiliated
corporations, where he was responsible for both onshore and offshore
exploration.
L. Scott Broussard has served as Vice President--Drilling and Production of
Spinnaker since August 1999 after joining the Company as Operations Manager in
1998. From 1994 to 1998, Mr. Broussard served as Vice President and co-owner
of HTK Consultants, Inc., an engineering consulting firm.
Kelly M. Barnes has served as Vice President--Land of Spinnaker since 1997.
From 1992 to 1997, Mr. Barnes served as Vice President--Land and Assistant
Corporate Secretary of Global Natural Resources Corporation and its affiliated
corporations.
Jimmy W. Bennett has served as Vice President--Systems Technology and
Processing of Spinnaker since May 2000. From 1997 to 2000, Mr. Bennett served
as Spinnaker's Systems Manager. From 1991 to 1997, Mr. Bennett served as
Systems Manager for King Ranch Oil and Gas, Inc.
Jeffrey C. Zaruba has served as Vice President, Treasurer and Assistant
Secretary of Spinnaker since May 2001 after joining the Company as Treasurer
in August 1999. From 1992 to 1999, Mr. Zaruba served as Assistant Controller
and held various financial and tax reporting positions with Cliffs Drilling
Company, which merged with R&B Falcon Corporation in 1998.
Employment Agreements
Mr. Jarvis entered into an employment agreement with Spinnaker effective
December 20, 1996. The agreement provides that Mr. Jarvis will receive a
minimum annual base salary equal to $250,000 or such amount as the Board of
Directors may, in its sole discretion, determine from time to time. Under the
agreement, Mr. Jarvis also may receive bonuses, at the discretion of the Board
of Directors, and will be allowed to participate in all benefit plans offered
by Spinnaker to similarly situated employees. Either the Board of Directors or
Mr. Jarvis can terminate the employment agreement at any time. The initial
term of the employment agreement ended on December 31, 2000. Under the terms
of the agreement, it automatically became a year-to-year employment agreement.
As a result, if his employment is not terminated before December 15, 2002, or
on each year thereafter, the term of the agreement will automatically be
extended for one additional year. In addition, if any payment or distribution
by Spinnaker or its affiliates to Mr. Jarvis is subject to Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), Spinnaker is required
to compensate him for the amount of any excise tax imposed on any payments or
distributions pursuant to Section 4999 of the Code and for any taxes imposed
on that additional payment. Section 4999 of the Code addresses additional
taxes payable in the event of a change in control of Spinnaker.
Mr. Hubbard entered into an employment agreement with Spinnaker effective
December 20, 1996. The agreement provides that Mr. Hubbard will receive a
minimum annual base salary equal to $165,000 or such amount as the Board of
Directors may, in its sole discretion, determine from time to time. Under the
agreement, Mr. Hubbard also may receive bonuses, at the discretion of the
Board of Directors, and will be allowed to participate in all benefit plans
offered by Spinnaker to similarly situated employees. Either the Board of
Directors or Mr. Hubbard can terminate the employment agreement at any time.
The initial term of the employment agreement ended on December 31, 1998. Under
the terms of the agreement, it automatically became a year-to-year employment
agreement. As a result, if his employment is not terminated before December
15, 2002, or on each year thereafter, the term of the agreement will
automatically be extended for one additional year.
Mr. Barnes entered into an employment agreement with Spinnaker effective
December 20, 1996. The agreement provides that Mr. Barnes will receive a
minimum annual base salary equal to $110,000 or such amount as the Board of
Directors may, in its sole discretion, determine from time to time. Under the
agreement, Mr. Barnes also may receive bonuses, at the discretion of the Board
of Directors, and will be allowed to participate in all benefit plans offered
by Spinnaker to similarly situated employees. Either the Board of Directors or
Mr. Barnes can terminate the employment agreement at any time. The initial
term of the employment agreement
7
ended on December 31, 1998. Under the terms of the agreement, it automatically
became a year-to-year employment agreement. As a result, if his employment is
not terminated before December 15, 2002, or on each year thereafter, the term
of the agreement will automatically be extended for one additional year.
EXECUTIVE COMPENSATION
The following table sets forth certain information for the years ended
December 31, 2001, 2000 and 1999 with respect to the compensation of the Chief
Executive Officer of the Company and each of its four other most highly
compensated executive officers in 2001 (collectively, the "named executive
officers"). All information presented in this section is restated to reflect
the two-for-one split of the Common Stock effected in September 1999.
Summary Compensation Table
Long-Term
Compensation
Awards
------------
Annual
Compensation Securities
Name and Principal ----------------- Underlying All Other
Position Year Salary Bonus(1) Options Compensation(2)
------------------ ---- ------ -------- ------------ ---------------
Roger L. Jarvis........... 2001 $353,438 $450,000 200,000 $11,250
Chairman of the Board, 2000 285,833 345,100 73,500 11,250
President and 1999 265,000 134,000 236,529 750
Chief Executive Officer
William D. Hubbard........ 2001 $207,867 $200,000 80,000 $11,250
Vice President-- 2000 182,292 134,138 25,000 11,250
Exploration 1999 175,000 60,000 59,960 750
Robert M. Snell (3)....... 2001 $220,000 $154,000 -- $ 7,350
Vice President, Chief 2000 -- -- 250,000 --
Financial Officer 1999 -- -- -- --
and Secretary
L. Scott Broussard........ 2001 $182,419 $155,000 60,000 $11,250
Vice President--Drilling 2000 155,250 110,228 25,000 10,065
and Production 1999 137,700 62,100 23,798 750
Kelly M. Barnes........... 2001 $149,049 $130,000 60,000 $ 9,693
Vice President--Land 2000 125,375 90,064 25,000 8,273
1999 118,000 41,300 63,593 750
--------
(1) Represents annual bonus earned for the fiscal year noted, even if such
bonus was paid in the following year.
(2) The All Other Compensation column includes amounts contributed or accrued
by the Company under the Spinnaker Exploration Company 401(k) Retirement
Savings Plan ("401(k) Plan") and the dollar value of insurance premiums
paid by the Company with respect to term life insurance for the benefit of
the named executive officer.
(3) Mr. Snell was appointed Vice President, Chief Financial Officer and
Secretary of Spinnaker effective December 26, 2000.
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Stock Options Granted in 2001
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Terms(3)
----------------------------------------- ----------------------
Number of % of Total
Securities Options Exercise
Underlying Granted to Price
Options Employees Per Expiration
Name Granted(1) in 2001(2) Share Date 5% 10%
---- ---------- ---------- -------- ---------- ---------- -----------
Roger L. Jarvis......... 200,000 16.1% $37.55 05/08/11 $4,722,999 $11,969,006
William D. Hubbard...... 32,800 2.6% 38.56 01/11/11 795,406 2,015,714
47,200 3.8% 37.55 05/08/11 1,114,628 2,824,685
Robert M. Snell......... -- -- -- -- -- --
L. Scott Broussard...... 24,600 2.0% 38.56 01/11/11 596,554 1,511,786
35,400 2.8% 37.55 05/08/11 835,971 2,118,514
Kelly M. Barnes......... 24,600 2.0% 38.56 01/11/11 596,554 1,511,786
35,400 2.8% 37.55 05/08/11 835,971 2,118,514
The following table contains information concerning stock option grants in
2001.
--------
(1) The options expire ten years from the date of grant and vest 20 percent on
the grant date and 20 percent on each anniversary of the grant date.
(2) The Board of Directors granted options to purchase 1,242,800 shares of
Common Stock in 2001.
(3) Calculated based upon the indicated rates of appreciation, compounded
annually, from the date of grant to the end of each option term. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent upon the future performance of the Common Stock and overall
market conditions. There can be no assurance that the amounts reflected in
this table will be achieved. The calculation does not take into account
the effects, if any, of provisions of the Company's option plans governing
termination of options upon employment termination, transferability or
vesting.
Stock Option Exercises and Fiscal Year-End Values
The following table contains certain information concerning stock options
exercised during 2001 and the value of unexercised options at December 31,
2001.
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares December 31, 2001 December 31, 2001(2)
Acquired Value ------------------------- -------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
Roger L. Jarvis......... 300,000 $10,575,000 903,317 298,712 $25,606,656 $4,203,999
William D. Hubbard...... 60,000 2,143,710 229,976 102,984 6,315,468 1,219,410
Robert M. Snell......... -- -- 100,000 150,000 1,428,500 2,142,750
L. Scott Broussard...... 2,000 68,703 71,518 83,080 1,783,443 1,123,082
Kelly M. Barnes......... 33,000 1,288,408 128,755 88,438 3,307,227 1,193,556
--------
(1) The value realized upon exercise of a stock option is equal to the
difference between the price of the Common Stock as reported by the New
York Stock Exchange on the date of exercise and the exercise price of the
stock option multiplied by the number of shares acquired.
(2) The value of each unexercised in-the-money stock option is equal to the
difference between the closing price of the Common Stock as reported by
the New York Stock Exchange on December 31, 2001 of $41.16 per share and
the exercise price of the stock option.
Transactions with Management and Others
The Company paid $17.4 million in 2001 to affiliates of Baker Hughes
Incorporated ("Baker Hughes"), an oilfield services company. Mr. Michael E.
Wiley, a director of Spinnaker, serves as Chairman of the Board, Chief
9
Executive Officer and President of Baker Hughes. The Company paid $83,000 in
2001 to Cooper Cameron Corporation ("Cooper Cameron"), an oilfield services
company. Mr. Sheldon R. Erikson, a director of Spinnaker, serves as Chairman
of the Board, Chief Executive Officer and President of Cooper Cameron. The
Company purchases oilfield goods, equipment and services from Baker Hughes,
Cooper Cameron and other companies in the ordinary course of business.
Spinnaker believes that these transactions are at arms-length and the charges
and fees that it pays for such goods, equipment and services are competitive
with the charges and fees of other companies providing oilfield goods,
equipment and services to the oil and gas exploration and production industry.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors in 2001 consisted of
Messrs. Harris, Erikson and Wiley. None of the members of the Compensation
Committee served as an officer or employee of the Company, and none were
formerly an officer of the Company or any of its subsidiaries. None of the
Company's executive officers serves as a member of the board of directors or
compensation committee of any entity that has one or more of its executive
officers serving as a member of the Board of Directors or Compensation
Committee.
The Company paid $17.4 million in 2001 to affiliates of Baker Hughes. Mr.
Michael E. Wiley, a director of Spinnaker, serves as Chairman of the Board,
Chief Executive Officer and President of Baker Hughes. The Company paid
$83,000 in 2001 to Cooper Cameron. Mr. Sheldon R. Erikson, a director of
Spinnaker, serves as Chairman of the Board, Chief Executive Officer and
President of Cooper Cameron. The Company purchases oilfield goods, equipment
and services in the ordinary course of business. Spinnaker believes that these
transactions are at arms-length and the charges and fees that it pays for such
goods, equipment and services are competitive with the charges and fees of
other companies providing oilfield goods, equipment and services to the oil
and gas exploration and production industry.
Compensation Committee Report on Executive Compensation
The Compensation Committee oversees the administration of compensation
programs applicable to all employees of the Company, including its executive
officers. Executive compensation is reviewed and approved annually by the
Compensation Committee.
The Compensation Committee seeks to encourage growth in the Company's oil
and gas reserves and cash flow and to enhance stockholder value through the
creation and maintenance of compensation opportunities that attract and retain
committed, highly qualified personnel. To achieve those goals, the
Compensation Committee believes that the compensation of all employees,
including executive officers, should include the following components:
. A base salary that is competitive with compensation offered by other oil
and gas exploration and production enterprises similar to the Company.
. Annual incentive compensation, based on Company performance and
profitability, to reward achievement of Company objectives, individual
responsibility and productivity, high quality work and impact on Company
results.
. Case-specific compensation plans to accommodate individual circumstances
or non-recurring situations as required.
Section 162(m) of the Code generally disallows a tax deduction to a public
company for compensation paid to its chief executive officer or four other
most highly compensated executive officers if the compensation of any such
officers exceeds $1.0 million in a particular year. Qualifying performance-
based compensation is not subject to the deduction limit if certain
requirements are met. A portion of the Company's compensation is performance-
based. The Company has structured portions of its performance-based
compensation, including certain stock option grants, in a manner that excludes
such compensation from the deduction limit.
10
The Compensation Committee has not intended and does not currently intend
to award compensation to any executive officer that would exceed the deduction
limit of Section 162(m), but no assurance can be given that such limit will
not be exceeded. In connection with its policies relating to executive
compensation, the Compensation Committee considered the implications of
Section 162(m) along with the various other factors described elsewhere in
this report in making its executive compensation determinations in 2001.
Company Performance. The Company experienced significant growth rates in
both production and reserves in 2001. Performance highlights in 2001 compared
to 2000 included record:
. Production of 53.1 billion cubic feet of gas equivalent ("Bcfe"), up 76
percent.
. Proved reserves of 323.2 Bcfe, up 77 percent after production; reserve
replacement was 365 percent of production.
. Revenues of $210.4 million, up 73 percent.
. Income from operations of $100.3 million, up 75 percent.
. Net income of $66.2 million, or $2.34 per diluted share, up 72 percent.
. Cash flows from operating activities, before working capital changes, of
$189.2 million, up 76 percent.
. Per unit lease operating expenses of $0.23, down 23 percent.
Executive Compensation. Before taking the actions described in this report,
the Compensation Committee thoroughly reviewed and discussed the Company's
financial and operating results. A summary of the indicators deemed
particularly relevant by the Compensation Committee are presented above.
Specific actions taken by the Compensation Committee regarding executive
compensation are summarized below.
Base salary. The Compensation Committee evaluated peer group information in
setting base salary levels. Annual salary adjustments for the Company's
executive group are based on general levels of market salary increases,
individual performance and the Company's overall financial and operating
results, without any specific relative weight assigned to any of these
factors.
Incentive Bonus. Awards granted to the named executive officers in February
2002 for the 2001 performance period are presented under "Bonus" in the
Summary Compensation Table. Such awards were based on level of responsibility,
the Company's performance and on individual productivity, quality of work and
impact on the Company's results. The Compensation Committee established awards
for each executive after reviewing the recommendations of the Chief Executive
Officer.
Stock Option Awards. In January and May 2001, the Compensation Committee
granted options to purchase 80,000, 60,000 and 60,000 shares of Common Stock
to Messrs. Hubbard, Barnes and Broussard, respectively, to provide incentive
with respect to the Company's future performance. Additionally, these awards
have a meaningful retention component since 20 percent vest on the grant date
and on each succeeding anniversary of the grant date.
401(k) Plan. Under the 401(k) Plan, eligible employees may defer the
maximum income allowed under current tax law. Salary deferrals are 100 percent
vested. Effective January 1, 2000, the Company began matching employee
contributions to the 401(k) Plan. The Company matches 100 percent of each
participant's contributions, up to six percent of the participant's annual
base salary, with Common Stock.
Chief Executive Officer Compensation. As described above, the Company's
executive compensation philosophy, including compensation of the Chief
Executive Officer, is a competitive base salary and incentive compensation
based upon the Company's performance. Specific actions taken by the
Compensation Committee regarding Mr. Jarvis' compensation are summarized
below.
11
Base Salary. The Compensation Committee increased Mr. Jarvis' salary from
$290,000 in 2000 to $362,500 effective February 16, 2001. The Compensation
Committee considered operating and financial results for 2000 and the
compensation received by chief executive officers of comparable companies in
the oil and gas exploration and production industry.
Incentive Bonus. The Compensation Committee approved a bonus of $450,000 to
Mr. Jarvis for 2001, which was paid in February 2002. This award was based
upon the Company's performance and his impact on the Company's results in
2001.
Stock Option Awards. In May 2001, the Compensation Committee granted
options to purchase 200,000 shares of Common Stock to Mr. Jarvis to provide
incentive with respect to the Company's future performance. This award vests
20 percent on the grant date and on each succeeding anniversary of the grant
date.
Compensation Committee
Jeffrey A. Harris
Sheldon R. Erikson
Michael E. Wiley
12
Report of the Audit Committee
March 1, 2002
To the Board of Directors:
We have reviewed and discussed with management the Company's audited
financial statements as of and for the year ended December 31, 2001.
We have discussed with the independent public accountants the matters
required to be discussed by Statement of Auditing Standards No. 61,
Communication with Audit Committees, as amended by the Auditing Standards
Board of the American Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from
the independent public accountants required by Independence Standard No. 1,
Independence Discussions with Audit Committees, as amended by the Independence
Standards Board, and have discussed with the independent public accountants
their independence.
Based on the review and discussions referred to above, we recommend to the
Board of Directors that the financial statements referred to above be included
in the Company's Annual Report on Form 10-K for the year ended December 31,
2001.
Audit Committee
Michael E. McMahon
Michael G. Morris
Michael E. Wiley
Fiscal 2001 Audit Fee Summary
During fiscal year 2001, Arthur Andersen LLP ("Andersen") provided services
in the following categories and amounts:
Audit Fees......................................................... $155,500
Financial Information Systems Design and Implementation Fees....... $ --
All Other Fees..................................................... $ 91,220
All Other Fees include costs primarily related to federal and state income
tax filings and registration statements. The Audit Committee has considered
whether the provision of non-audit services by the Company's independent
public accountants is compatible with maintaining auditor independence.
13
Stockholder Return Performance Presentation
As required by applicable rules of the Securities and Exchange Commission,
the performance graph shown below was prepared based upon the following
assumptions:
1. $100 was invested in Common Stock on September 29, 1999, and $100 was
invested in each of the S&P 500 Index, the S&P 400 Oil/Gas--
Exploration/Production Index and the New Peer Group (as defined below)
on September 29, 1999 at the closing price on such date.
2. The New Peer Group investment is weighted based on the market
capitalization of each individual company within the applicable peer
group at the beginning of the period and each year.
3. Dividends are reinvested on the ex-dividend dates.
The old industry peer group was comprised of the following: Basin
Exploration, Inc., Chieftain International, Inc., The Houston Exploration
Company, Newfield Exploration Company and Stone Energy Corporation.
Considering the Company's growth and recent acquisitions of Basin Exploration,
Inc. and Chieftain International, Inc. by other companies, the Company revised
its peer group to include companies that it considers more representative
because they are closer in size and scope of operations when compared to the
Company. The new industry peer group (the "New Peer Group") is comprised of
the following: Forest Oil Corp., The Houston Exploration Company, Newfield
Exploration Company, Noble Affiliates, Inc., Pogo Producing Company, Stone
Energy Corporation and Westport Resources Corporation.
[Graph appears here]
09/29/99 12/31/99 12/31/00 12/31/01
-------- -------- -------- --------
Spinnaker Exploration Company.......... $100 $ 97.41 $293.09 $283.85
S&P 500 Index.......................... $100 $111.73 $101.56 $ 89.49
S&P 400 Oil/Gas-Exploration/Production
Index................................. $100 $ 85.81 $156.64 $147.37
New Peer Group......................... $100 $ 81.33 $142.41 $109.65
The foregoing stock price performance comparisons shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Definitive Proxy Statement into any filing under the Securities
14
Act of 1933 or under the Securities Exchange Act of 1934, except to the extent
that the Company specifically incorporates this graph by reference, and shall
not otherwise be deemed filed under such Acts.
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the
performance graph. The Company will not make or endorse any predictions as to
future stock performance.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(Proposal Two)
The Audit Committee, under the authority granted to it by the Board of
Directors, appointed KPMG LLP as independent public accountants to audit the
consolidated financial statements of the Company for the year ending December
31, 2002.
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,
an abstention or a broker non-vote would have the same effect as a vote
against this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION OF
THIS APPOINTMENT.
The Audit Committee annually considers and recommends to the Board of
Directors the selection of the Company's independent public accountants. On
April 5, 2002, the Audit Committee, under the authority granted to it by the
Board of Directors, decided to dismiss Arthur Andersen LLP as Spinnaker's
independent public accountants and engaged KPMG LLP to serve as Spinnaker's
independent public accountants for 2002.
Andersen's reports on the Company's consolidated financial statements for
either of the past two fiscal years did not contain an adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
During the Company's two most recent fiscal years and the period from
January 1, 2002 through April 5, 2002, there were no disagreements with
Andersen on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Andersen, would have caused Andersen to
make reference to the subject matter of the disagreements in connection with
Andersen's report; and during such period there were no "reportable events" of
the kind listed in Item 304(a)(1)(v) of Regulation S-K.
The Company provided Andersen with a copy of the foregoing disclosure and
requested Andersen to furnish Spinnaker with a letter addressed to the
Securities and Exchange Commission stating whether it agrees with the
statements by the Company in the foregoing disclosure and, if not, stating the
respects in which it does not agree. Andersen's letter was filed as Exhibit
16.1 to the Company's Current Report on Form 8-K dated April 5, 2002.
During the Company's two most recent fiscal years and through April 5,
2002, it did not consult KPMG LLP with respect to the application of
accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on the Company's
consolidated financial statements, or any other matters or reportable events
listed in Items 304(a)(2)(i) and (ii) of Regulation S-K.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent public accountants. The Board of
Directors may terminate the appointment of KPMG LLP as the Company's
independent public accountants without the approval of the stockholders of the
Company whenever the Board of Directors deems such termination necessary or
appropriate. A representative of KPMG LLP is expected to be present at the
Annual Meeting, will be offered the opportunity to make a statement if such
representative desires to do so and will be available to respond to
appropriate questions.
15
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournments(s) thereof, it is
intended that the enclosed proxy will be voted in accordance with the judgment
of the persons voting the proxy.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Any stockholder who wishes to submit a proposal for inclusion in the proxy
material for the Company's 2003 Annual Meeting of Stockholders must forward
such proposal to the Secretary of the Company at the address indicated on the
cover page of this proxy statement, so that the Secretary receives it no later
than November 26, 2002.
In addition, the Company's Bylaws provide that only such business as is
properly brought before the Annual Meeting will be conducted. For business to
be properly brought before the meeting or for nominations of persons for
election to the Board of Directors to be properly made at the Annual Meeting
by a stockholder, notice must be received by the Secretary of the Company at
the address indicated on the cover page not earlier than January 7, 2003 and
not later than February 6, 2003.
On request, the Secretary of the Company will provide detailed instructions
for submitting proposals or nominations.
By Order of the Board of Directors
/s/ ROBERT M. SNELL
Robert M. Snell
Secretary
April 10, 2002
16
Appendix A
SPINNAKER EXPLORATION COMPANY
AUDIT COMMITTEE CHARTER
OF THE BOARD OF DIRECTORS
Purpose
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of Spinnaker Exploration Company ("Spinnaker") is responsible for
providing independent and objective oversight of the accounting functions and
internal controls of Spinnaker in order to enhance the quality of financial
reporting. The primary purpose of the Audit Committee Charter ("Charter") is
to document the scope of the Committee's responsibilities and how it carries
out those responsibilities, including the structure, processes and membership
requirements.
Scope of Responsibilities
Oversight of Quarterly and Annual Financial Reporting
The Committee shall consider relevance, reliability, comparability and
clarity in its oversight of the quality of quarterly and annual financial
reporting. The Committee shall engage in meaningful discussions with
management and the independent public accountants about the quality, not just
the acceptability, of financial reporting decisions and judgments.
The Committee shall review with management and the independent public
accountants annual consolidated financial statements and such other
consolidated financial statements and information as the Committee so
determines. Following the satisfactory completion of each year-end review, the
Committee shall recommend to the Board the inclusion of the audited
consolidated financial statements in the Annual Report on Form 10-K.
Independent Public Accountants
The Committee and the Board shall have the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the
independent public accountants. The Committee shall recommend to the Board the
firm to be employed by Spinnaker as its independent public accountants, which
firm shall be ultimately accountable to the Board and the Committee as
representatives of stockholders. The Committee shall evaluate the independent
public accountants on an annual basis.
The Committee is responsible for ensuring the independent public
accountants periodically submit to the Committee a formal written statement
regarding relationships and services which may affect objectivity and
independence, for discussing any matters relating to the independent public
accountants' independence and for recommending that the full Board take
appropriate action to address the independent public accountants'
independence.
Audits
The Committee's function is one of oversight and review, and it is not
expected to audit Spinnaker, to define the scope of the audit, to control
Spinnaker's accounting practices or to define the standards to be used in
preparation of the consolidated financial statements. The Committee shall
consult with the independent public accountants regarding the plan of audit.
The Committee shall also review with the independent public accountants their
report on the audit. The Committee shall maintain independent communication
and information flow with the independent public accountants and actively
review and assess the scope of their work and the quality of their
performance.
A-1
Accounting Principles
The Committee shall review significant developments in accounting rules.
The Committee shall also review with management and the independent public
accountants issues involving judgment and affecting quality and significant
proposed changes in Spinnaker's methods of accounting or consolidated
financial statements.
Critical Accounting Policies
The Committee shall review the selection, application and disclosure of
critical accounting policies and have proactive discussions with management
and the independent public accountants about these critical accounting
policies.
Internal Accounting Controls
The Committee shall consult with management and the independent public
accountants regarding the adequacy of internal accounting controls. This
consultation should be conducted out of management's presence, where
appropriate.
Business Risk Management
The Committee shall oversee and improve the business risk management
process, which is the process through which Spinnaker identifies and controls
business and financial reporting risks.
Compliance with Laws and Regulations
The Committee shall review with management Spinnaker's internal control
systems intended to ensure the reliability of financial reporting and
compliance with applicable laws and regulations. The review shall include any
significant problems and regulatory concerns.
Ethical Environment
The Committee shall review with management the establishment and
maintenance of an environment that promotes ethical behavior, including the
establishment, communication and enforcement of codes of conduct to guard
against dishonest, unethical or illegal activities.
Oversight of Directors and Executive Officers and Conflicts of Interest
The Committee shall review significant conflicts of interest involving
directors and executive officers. The Committee shall review compliance with
Spinnaker's policies and procedures with respect to officers' expense accounts
and perquisites, including their use of corporate assets. The Committee also
shall review any questionable or illegal payments.
In the event that a Committee member faces a potential or actual conflict
of interest with respect to a matter before the Committee, that Committee
member shall be responsible for alerting the Committee Chairman, and in the
case where the Committee Chairman faces a potential or actual conflict of
interest, the Committee Chairman shall advise the Chairman of the Board. In
the event that the Committee Chairman or the Chairman of the Board concurs
that a potential or actual conflict of interest exists, an independent
substitute director shall be appointed as a Committee member until the matter
posing the potential or actual conflict of interest is resolved.
Charter Amendments
The Committee shall review this Charter annually, assess its adequacy and
propose appropriate amendments to the Board.
A-2
Communications to the Board
The Committee shall report to the Board from time to time with respect to
its activities and its recommendations. When presenting any recommendation or
advice to the Board, the Committee shall provide such background and
supporting information as may be necessary for the Board to make an informed
decision. The Committee shall keep minutes of its meetings and make such
minutes available to the full Board for its review.
Communications to Stockholders
The Committee shall report to stockholders in Spinnaker's proxy statement
for its annual meeting the information required by law.
Other Authority
The Committee is authorized to confer with Spinnaker management and other
employees to the extent it may deem necessary or appropriate to fulfill its
duties. The Committee is authorized to conduct or authorize investigations
into any matters within the Committee's scope of responsibilities. The
Committee also is authorized to seek outside legal or other advice to the
extent it deems necessary or appropriate, provided it shall keep the Board
advised as to the nature and extent of such outside advice. The Committee will
perform such other functions as are authorized for this Committee by the
Board.
Composition and Membership Requirements
The Board shall appoint not less than three independent directors to the
Committee. "Independent director" means a person other than an officer or
employee of Spinnaker or its subsidiaries or any other individual having a
relationship which, in the opinion of the Board, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director. Members of the Committee shall be financially literate or become
financially literate within a reasonable period of time after appointment to
the Committee and at least one member of the Committee shall have accounting,
related financial management expertise or any other comparable experience or
background that results in the individual's financial sophistication. The
Committee will self-assess the financial literacy and other skills of
Committee members against those skills that are needed to fulfill the
Committee's roles and responsibilities on an annual basis. The Committee will
solicit feedback on the skill requirements and skill gaps of the Committee and
assess the contribution and performance of individual Committee members from
the Board, management and independent public accountants. The Committee shall
continually monitor membership requirements.
Quorum and Committee Meetings
A quorum of the Committee shall be declared when a majority of the
appointed members of the Committee are in attendance. The Committee shall, at
a minimum, meet quarterly. Additional meetings shall be scheduled at the
discretion of the Chairman. The Committee may ask members of management or
others to attend the meeting and provide pertinent information as necessary.
A-3
SPINNAKER EXPLORATION COMPANY
Proxy for Annual Meeting of Stockholders--May 7, 2002
This Proxy is Solicited on Behalf of the Spinnaker Exploration Company Board
of Directors
The undersigned hereby appoints Roger L. Jarvis, Robert M. Snell and Jeffrey
C. Zaruba, and each of them, proxies for the undersigned with full power of
substitution, to vote all shares of Spinnaker Exploration Company Common Stock
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of Spinnaker Exploration Company to be held in Houston, Texas, on
Tuesday, May 7, 2002 at 9:00 a.m., or at any adjournment thereof, upon the
matters set forth on the reverse side and described in the accompanying Proxy
Statement and upon such other business as may properly come before the meeting
or any adjournment thereof.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY ITEM.
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS, PLEASE SIGN THE REVERSE SIDE, NO BOXES NEED TO BE CHECKED.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
SPINNAKER EXPLORATION COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
1. ELECTION OF DIRECTORS For Withheld For all Nominee Exception(s)
1) Roger L. Jarvis, 2) Sheldon R. Erikson, All All Except ---------------------
3) Jeffrey A. Harris, 4) Michael E. McMahon, [ ] [ ] [ ] ---------------------
5) Howard H. Newman, 6) Michael G. Morris
and 7) Michael E. Wiley
2. TO RATIFY SELECTION OF INDEPENDENT For Against Abstain
PUBLIC ACCOUNTANTS [ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.
NOTE: Please sign as name appears hereon.
Joint owners should each sign. When
signing as attorney,executor,
administrator,trustee or guardian, please
give full title as such.
Signature ___________________ Date:______
Signature ___________________ Date:______