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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14A-6(E)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
EEX CORPORATION
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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)
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
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Notes:
EEX Corporation
Notice of Annual Meeting of Shareholders
To be Held on May 30, 2002
To the Shareholders of
EEX Corporation:
The Annual Meeting of the Shareholders of EEX Corporation, a Texas
corporation (the "Company"), will be held at the Company's offices at 2500
CityWest Blvd., Houston, Texas 77042 on Thursday, May 30, 2002, at 1:00 p.m.,
Central Daylight Time, for the following purposes:
1. To elect two Directors for terms expiring at the Annual Meeting held in
2005;
2. To ratify the Board of Directors' appointment of Ernst & Young LLP as
independent auditors of the Company for the year ended December 31,
2002; and
3. To consider and act upon such other business as may be properly
presented to the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business April 1, 2002, as
the record date for the determination of the shareholders entitled to notice
of and to vote at the meeting or any adjournment thereof. Only shareholders of
record at the close of business on the record date are entitled to notice of
and to vote at such meeting. A list of such shareholders will be available at
the time and place of the meeting and during the ten days prior to the meeting
at the office of the Corporate Secretary of the Company at the address above.
Shareholders are cordially invited to attend the Annual Meeting. Regardless
of whether you expect to attend the meeting in person, we urge you to read the
attached Proxy Statement and sign, date and mail the accompanying proxy card
in the enclosed postage-prepaid envelope. It is important that your shares are
represented at the meeting, and your promptness will assist us in making
necessary preparations for the meeting. If you receive more than one proxy
card because your shares are registered in different names or addresses, each
card should be completed and returned to assure that all your shares are
voted.
A Proxy Statement, proxy card and the Company's 2001 Annual Report on Form
10-K accompany this Notice of Annual Meeting.
By Order of the Board of Directors,
Richard L. Edmonson
Senior Vice President,
General Counsel
and Corporate Secretary
Houston, Texas
April 29, 2002
EEX Corporation
2500 CityWest Boulevard
Suite 1400
Houston, Texas 77042
(713) 243-3100
Proxy Statement
Annual Meeting of Shareholders
To be Held on May 30, 2002
This Proxy Statement is being mailed on or about April 29, 2002, to
shareholders of EEX Corporation, a Texas corporation (the "Company"), in
connection with the solicitation of proxies on behalf of the Board of
Directors of the Company for use at the Annual Meeting of Shareholders to be
held on May 30, 2002, at 1:00 p.m., Central Daylight Time, at the Company's
offices at 2500 CityWest Blvd., Houston, Texas 77042.
The purpose of the Annual Meeting is to consider and vote upon
. the election of two Directors for terms expiring at the Annual Meeting
held in 2005,
. the ratification of the appointment of Ernst & Young LLP as independent
auditors of the Company, and
. such other matters as may be properly presented to the meeting or any
adjournment thereof.
A shareholder may revoke his or her proxy at any time before it is
exercised by filing with the Corporate Secretary an instrument revoking it, by
submitting a subsequently dated proxy, or by appearing at the annual meeting
and voting in person. Unless revoked, a properly signed and dated proxy that
is returned will be voted in accordance with the directions thereon. If no
instructions are specified, the shares will be voted for the election of the
nominees for Director and for the ratification of the appointment of Ernst &
Young LLP as independent auditors. If other matters are properly presented
before the Annual Meeting, the persons voting the proxies will vote them in
accordance with their best judgment.
Holders of record of the Company's common stock (the "Common Stock") at the
close of business on the record date, April 1, 2002, are entitled to vote at
the Annual Meeting. On April 1, 2002, the Company had outstanding 42,487,395
shares of Common Stock. Each share of Common Stock is entitled to one vote at
the Annual Meeting.
Holders of record of the Company's Series B 8% Cumulative Perpetual
Preferred Stock (the "Preferred Stock") are entitled to vote upon all matters
upon which holders of Common Stock have the right to vote. Each share of
Preferred Stock is entitled to the number of votes equal to the quotient of
(i) 8,000,000 divided by (ii) the number of outstanding shares of Preferred
Stock, but in no event more than 5.334 votes per share of Preferred Stock. On
April 1, 2002, the Company had outstanding 1,937,450 shares of Preferred
Stock, entitling the holders thereof to 8,000,000 votes at the Annual Meeting.
The holders of a majority of the shares issued and outstanding and entitled
to vote, present in person or represented by proxy, will constitute a quorum
for the transaction of business at the Annual Meeting. A majority of all
outstanding shares entitled to vote at the meeting is required for the
election of Directors. A majority of the votes cast or expressly abstaining is
required for the ratification of the appointment of independent auditors.
Except any matter for which a specified portion of the shares entitled to vote
is required by statute, the Company's Restated Articles of Incorporation or
its Bylaws, any other matter that is submitted for approval would require the
affirmative vote of the holders of a majority of the shares entitled to vote
at the meeting and voted for or against or expressly abstaining. The
inspectors of election will treat broker non-votes on any matter as to which
the broker has indicated on the proxy that it does not have discretionary
authority to vote as shares not entitled to vote with respect to that matter;
however, such shares will be considered present and entitled to vote for
quorum purposes so long as they are entitled to vote on other matters.
1
Enclosed with this Proxy Statement is a copy of the Company's 2001 Annual
Report which is not to be regarded as proxy soliciting material or as a
communication by means of which solicitation is made.
ELECTION OF DIRECTORS
Information Regarding Nominees
Two Directors will be elected at the Annual Meeting. The Company's Bylaws
provide for a classified Board. The Directors are divided into three classes
with staggered terms expiring at the third Annual Meeting following the one at
which members of the class are elected. The following two Directors have been
nominated for election by the Board of Directors upon recommendation of the
Governance and Nominating Committee to serve for a term expiring at the Annual
Meeting in 2005:
Frederick S. Addy
Mr. Addy, age 70, retired as Executive Vice President, Chief Financial
Officer, and Director of Amoco Corporation, an international integrated oil
and gas company, in 1994. Mr. Addy has been a Director of the Company since
January 1995. He also served the Company as interim Chairman and Chief
Executive Officer from September 1996 to January 1997 and as President from
October 1996 to January 1997.
Howard H. Newman
Mr. Newman, age 55, is a Vice Chairman of the investment firm Warburg
Pincus LLC, where he has been a Member and Managing Director, and a general
partner of Warburg, Pincus & Co. since 1987. Prior to joining Warburg Pincus,
he held various positions with Morgan Stanley & Co., Incorporated. He became a
Director of the Company on January 8, 1999. Mr. Newman also serves on the
Board of the Directors of ADVO, Inc., Cox Insurance Holdings, Plc., Encore
Acquisition Company, Newfield Exploration Company, Spinnaker Exploration
Company, and several private companies.
The Board of Directors recommends a vote "FOR" election of the Nominees to
the Board of Directors.
Information about the Company's continuing Directors is set forth below:
B. A. Bridgewater, Jr. (term expires 2003)
Mr. Bridgewater, age 68, retired in 1999 as Chairman, President and Chief
Executive Officer of Brown Group, Inc., a wholesaler and retailer of footwear.
He has been a Director of the Company since January 1995. Mr. Bridgewater is a
Director of FMC Corporation, FMC Technologies, Inc., Mitretek Systems, Inc.,
and ThoughtWorks, Inc., and an Advisory Director of Schroder Venture Partners
LLC.
Thomas M Hamilton (term expires 2004)
Mr. Hamilton, age 58, became a Director and was elected Chairman and
President, Chief Executive Officer of the Company in January 1997. Previously
Mr. Hamilton served Pennzoil Company for five years where he was Executive
Vice President, and President of Pennzoil Exploration & Production Company. At
the time of his employment, Pennzoil was engaged in exploration and
production, refining, marketing and franchising.
Frederick M. Lowther (term expires 2004)
Mr. Lowther, age 58, has been a partner in the law firm of Dickstein,
Shapiro, Morin & Oshinsky, LLP, Washington, D.C. since 1973. He has been a
member of such firm's Executive Committee and chairman of its Compensation
Committee since 1989. He is also Counsel to the Chairman of KeySpan
Corporation. He has been
2
a Director of the Company since August 1997. He is also a Director of Poseidon
Resources Corporation and KeySpan Energy Development Corporation.
Michael P. Mallardi (term expires 2003)
Mr. Mallardi, age 68, retired in 1996 as the Senior Vice President of
Capital Cities/ABC, Inc., and President of Capital Cities/ABC Broadcast Group,
a part of the Walt Disney Company and a television and radio broadcaster. He
has been a Director of the Company since October 1996.
Executive Officers
Name Age Title
---- --- -----
T. M Hamilton............... 58 Chairman and President, Chief Executive Officer
D. R. Henderson............. 51 Executive Vice President and Chief Operating
Officer
R. S. Langdon............... 51 Executive Vice President, Finance and
Administration, and Chief Financial Officer
R. L. Edmonson.............. 50 Senior Vice President, General Counsel and
Corporate Secretary
R. W. Oliver................ 48 President of EEX Exploration and Production
Company, LLC
Mr. Hamilton was elected Chairman and President, Chief Executive Officer in
January 1997. Previously, Mr. Hamilton served Pennzoil Company for five years
where he was Executive Vice President and President of Pennzoil Exploration &
Production Company.
Mr. Henderson was elected Executive Vice President and Chief Operating
Officer in March 1997. He was Executive Vice President, Worldwide Exploration,
of the Company from January 1997 to March 1997. Previously, he held the
position of Senior Vice President of Worldwide Exploration at Pennzoil
Exploration & Production Company. Prior to that, he held various positions
with Pennzoil Company and its subsidiaries, including Senior Vice President--
Exploration, Senior Vice President--International, and Senior Vice President--
Worldwide Exploration.
Mr. Langdon was elected Executive Vice President, Finance and
Administration and Chief Financial Officer in March 1997. Previously, he was
an oil and gas consultant from August 1996 to March 1997. Prior to that, he
held various positions with the Pennzoil Companies since 1991, including
Executive Vice President--International Marketing--Pennzoil Products Company,
from June 1996 to August 1996; Senior Vice President--Business Development &
Shared Services--Pennzoil Company from January 1996 to June 1996; and Senior
Vice President--Commercial & Control--Pennzoil Exploration & Production
Company from December 1991 to December 1995.
Mr. Edmonson was elected Senior Vice President, General Counsel and
Corporate Secretary in July 2000. Previously, he was in private practice from
August 1999 to June 2000. Prior to that, he held various positions with
PennzEnergy Company and the oil and gas subsidiaries of Pennzoil Company from
June 1977 to August 1999, including Senior Vice President--Negotiations, Land
and Administration; Senior Vice President-- International and Negotiations;
Senior Vice President--Legal; Vice President--Legal; Senior Attorney; and
Attorney.
Mr. Oliver became President of EEX Exploration and Production Company, LLC,
a subsidiary of the Company, on December 17, 1999. Previously, he was
President of Tesoro Exploration and Production Company and Tesoro Bolivia
Petroleum Company, subsidiaries of Tesoro Petroleum Corporation, from
September 1995 to December 17, 1999. He was an independent consultant from
November 1994 to September 1995. Prior to that, he was Vice President,
Exploration/Acquisitions of Bridge Oil (U.S.A.), Inc. from December 1988 to
November 1994.
All officers of the Company are elected annually by the Board of Directors.
Officers may be removed by the Board of Directors whenever, in its judgment,
the best interest of the Company will be served thereby.
3
Stock Ownership of Management and Certain Beneficial Owners of the Company
The following table and footnotes set forth certain information concerning
the beneficial ownership of Common Stock and Preferred Stock as of April 1,
2002, by
. each person who is known by the Company to own beneficially more than
five percent of such securities,
. each Director and nominee for Director,
. each executive officer identified under "Executive Compensation," and
. all Directors and executive officers as a group.
Under SEC rules, several persons may be deemed the beneficial owners of the
same shares. Consequently, readers are urged to read the footnotes to the
table. Unless otherwise indicated, each person named in the following table
has the sole power to vote and dispose of the shares listed next to their
name. The address of each person listed below is 2500 CityWest Boulevard,
Suite 1400, Houston, Texas 77042, unless a different address is provided.
Shares Beneficially Owned
----------------------------------------------------------
Common Stock(1) Preferred Stock
---------------------- ---------------------
Name of Beneficial Owner Number Percent Number Percent Percentage(2)
------------------------ ---------- ------- --------- ------- -------------
Warburg, Pincus Equity
Partners, L.P.(3)...... 13,000,000(4) 23.4 1,937,450(5) 100 32.5(6)
Richard C. McKenzie,
Jr..................... 7,500,000(7) 17.7 -- -- 11.6
Dimensional Fund
Advisors, Inc.......... 3,655,730(8) 8.6 -- -- 5.7
Wellington Management
Company, LLP........... 3,141,800(9) 7.4 -- -- 4.9
Calm Waters
Partnership............ 2,812,200(10) 6.6 -- -- 4.4
Richard S. Strong....... 2,812,200(10) 6.6 -- -- 4.4
T.M Hamilton............ 791,896(11) 1.8 -- -- 1.2
F.S. Addy............... 99,198(12) * -- -- *
B.A. Bridgewater, Jr.... 120,918(12) * -- -- *
F.M. Lowther............ 104,574(12) * -- -- *
M.P. Mallardi........... 110,419(12) * -- -- *
H.H. Newman(13)......... 13,101,652(12) 23.6 1,937,450(13) 100 32.6(6)
D.R. Henderson.......... 261,752(14) * -- -- *
R.S. Langdon............ 263,340(15) * -- -- *
R.L. Edmonson........... 35,069(16) * -- -- *
R.W. Oliver............. 73,458(17) * -- -- *
All directors and
executive officers as a
group (10 persons)..... 14,962,276(18) 26.4 1,937,450(13) 100 35.5(6)
--------
* Less than 1%
(1) Includes (i) shares held in EEX's Employee Stock Purchase and Savings
Plan, (ii) restricted shares awarded under the Revised and Amended 1996
Stock Incentive Plan and the Amended and Restated 1998 Stock Incentive
Plan, and (iii) shares of common stock issuable under options or warrants
exercisable as of April 1, 2002, or within 60 days thereafter.
(2) Includes (i) shares held in EEX's Employee Stock Purchase and Savings
Plan, (ii) restricted shares awarded under the Revised and Amended 1996
Stock Incentive Plan and the Amended and Restated 1998 Stock Incentive
Plan, (iii) shares of common stock issuable under options or warrants
exercisable as of April 1, 2002, or within 60 days thereafter, and (iv)
the 8,000,000 votes the holders of Preferred Stock are entitled to cast
on matters voted on by the holders of common stock as described in Note 6
below.
(3) These securities are owned by Warburg, Pincus Equity Partners, L.P. and
certain affiliated partnerships ("WPEP"). The sole general partner of
WPEP is Warburg, Pincus & Co., a New York general partnership ("WP").
Warburg Pincus, L.L.C., a New York limited liability company ("WP LLC"),
manages WPEP. The members of WP LLC are substantially the same as the
partners of WP. Lionel I. Pincus is the
4
managing partner of WP and the managing member of WP LLC and may be deemed
to control both entities. WP and WP LLC may be deemed to beneficially own
the warrants and preferred stock owned by WPEP. As more fully described in
Note 13 below, Mr. Newman may also be deemed to have an indirect pecuniary
interest in the warrants and preferred stock. The address of each WPEP,
WP, WP LLC, Mr. Pincus and Mr. Newman is 466 Lexington Ave., 10th Floor,
New York, New York 10017.
(4) Consists of common stock issuable upon exercise of warrants. The warrants
are in three series, each exercisable for $12 per share of common stock:
(a) Series A warrants to acquire 10,500,000 shares, exercisable for 10
years; (b) Series B warrants to acquire 2,500,000 shares, exercisable for
seven years, and (c) Series C warrants to acquire 8,000,000 shares,
exercisable for seven years. The Series A and Series B warrants are
exercisable for shares of common stock by paying cash or utilizing shares
of Preferred Stock at the stated value on a gross or net basis and are
included in the table. The Series C warrants are currently exercisable
only as a stock appreciation right (entitled to receive the cash
difference between the exercise price and the market price of the common
stock on the trading day prior to the date of exercise). The Company may,
at its option prior to July 30, 2002, elect to allow the Series C
warrants to be exercised for shares of common stock by paying cash or by
utilizing shares of Preferred Stock at the stated value on a gross or net
basis. The Series C warrants are not included in the table.
(5) Consists of Series B 8% Cumulative Perpetual Preferred Stock ("Preferred
Stock").
(6) Prior to any adjustment in the dividend rate, holders of Preferred Stock
are entitled to cast an aggregate of 8,000,000 votes on matters voted on
by the holders of common stock and to a separate class vote on certain
matters affecting the Preferred Stock. For a period of ten years after
the issuance of the Preferred Stock, in connection with any matter in
which WPEP (i) has voting rights which are counted together with the
voting rights of voting stock and (ii) does not have voting rights as a
holder of Preferred Stock counted separately as a class, WPEP has agreed
to limit its aggregate voting rights to one vote less than 20% of the
aggregate number of votes entitled to be cast on any matter by holders of
common stock or any other class of capital stock.
(7) Based on information set forth in an amendment to Schedule 13D, filed
February 27, 2002, these shares were reported by Richard C. McKenzie,
Jr., 118 John Street, Greenwich, Connecticut 06831. Mr. McKenzie reported
beneficial ownership of 7,500,000 shares with shared voting power and
7,500,000 shares with shared dispositive power.
(8) Based on information set forth in an amendment to Schedule 13G, filed
February 12, 2002, these shares were reported, as of December 31, 2001,
by Dimensional Fund Advisors Inc., ("Dimensional"), 1299 Ocean Avenue,
11th Floor, Santa Monica, California 90401 as being owned by clients of
Dimensional. Dimensional reported beneficial ownership of 3,665,030
shares with sole voting power and 3,665,030 shares with sole dispositive
power.
(9) Based on information set forth in an amendment to Schedule 13G, filed
February 13, 2002, these shares were reported, as of December 31, 2001,
by Wellington Management Company, LLP, ("WMC"), 75 State Street, Boston,
Massachusetts 02109 as being owned by clients of WMC. WMC reported
beneficial ownership of 1,997,500 shares with shared voting power and
3,141,800 shares with shared dispositive power.
(10) Based on information set forth in an amendment to a jointly-filed
Schedule 13G, filed February 13, 2002, these shares were reported by Calm
Waters Partnership ("Calm Waters") and by Richard S. Strong, 100 Heritage
Reserve, Menomenee Falls, Wisconsin 53051. Mr. Strong is a general
partner of Calm Waters. Calm Waters and Mr. Strong each reported
beneficial ownership of 2,812,200 shares with shared voting power and
2,812,200 shares with shared dispositive power.
(11) Includes 396,666 shares of common stock issuable upon exercise of
options.
(12) Includes 65,351 shares of common stock issuable upon exercise of options.
(13) Mr. Newman is a Vice Chairman, Managing Director and member of WP LLC and
a general partner of WP. As such, Mr. Newman may be deemed to have an
indirect pecuniary interest within the meaning of Rule 16a-1 under the
Securities and Exchange Act of 1934 ("Exchange Act") in the warrants and
Preferred Stock (and related voting rights) described in Notes 3 and 4
above. Mr. Newman disclaims
5
beneficial ownership of the warrants and Preferred Stock within the meaning
of Rule 13d-3 under the Exchange Act or otherwise.
(14) Includes 183,333 shares of common stock issuable upon exercise of options.
(15) Includes 190,000 shares of common stock issuable upon exercise of options.
(16) Includes 16,667 shares of common stock issuable upon exercise of options.
(17) Includes 36,666 shares of common stock issuable upon exercise of options.
(18) Includes 14,150,087 shares of common stock issuable upon exercise of
warrants or options.
Board of Directors and Committees
During 2001, the Board of Directors met eight times. No Director attended
fewer than 75 percent of the aggregate of the total number of Board meetings
and the meetings of a committee on which he served. The standing committees of
the Board of Directors are the Audit Committee, the Compensation Committee and
the Governance and Nominating Committee.
Audit Committee
The Audit Committee meets periodically with the independent and internal
auditors; reviews annual financial statements and the independent auditors'
work and report thereon; reviews the independent auditors' report on internal
controls and related matters; selects and recommends to the Board of Directors
the appointment of the independent auditors; reviews the letter of engagement
and statement of fees which pertain to the scope of the annual audit and
certain special audit and non-audit work which may be required or suggested by
the independent auditors; receives and reviews information pertaining to
internal audits; directs and supervises special investigations; and performs
any other functions deemed appropriate by the Board of Directors. Members of
the Audit Committee are Messrs. Addy (Chairman), Bridgewater, Lowther, and
Mallardi, each of whom is independent (as defined in Sections 303.01(B)(2)(a)
and (3) of the New York Stock Exchange Listed Company Manual). The Board of
Directors has adopted a written charter for the Audit Committee. A copy of the
Audit Committee Charter, as amended February 20, 2002, is attached to this
Proxy Statement. The Audit Committee met three times during 2001.
Audit Committee Report
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. In addition, the Committee has discussed
with the independent auditors the auditors' independence from management and
the Company including the matters in the written disclosures and letter
received by the Audit Committee from the independent auditors as required by
the Independence Standards Board.
The Committee discussed with the Company's internal and independent auditors
the overall scope and plans for their respective audits. The Committee meets
with the internal and independent auditors, with and without management
present, to discuss the results of their examinations, their evaluations of the
Company's internal controls, and the overall quality of the Company's financial
reporting.
6
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the
audited financial statements be included in the Annual Report on Form 10-K for
the year ended December 31, 2001 for filing with the Securities and Exchange
Commission. The Committee and the Board have also recommended, subject to
shareholder approval, the selection of the Company's independent auditors.
Dated: February 20, 2002 Audit Committee
F. S. Addy, Chairman
B. A. Bridgewater, Jr.
F. M. Lowther
M. P. Mallardi
Compensation Committee
The Compensation Committee establishes, approves, or recommends to the
Board of Directors, in those instances where its approval is required, the
annual performance goals for and the compensation and major items related to
the compensation of the Chief Executive Officer, officers and other key
employees. The Committee also ensures that the Company implements plans for
Chief Executive Officer succession and executive succession and administers
the Company's stock option plans. Members of the Compensation Committee are
Messrs. Mallardi (Chairman), Addy, Bridgewater, Lowther and Newman. The
Compensation Committee met three times in 2001.
Governance and Nominating Committee
The function of the Governance and Nominating Committee of the Board of
Directors is to consider and make recommendations to the Board concerning the
appropriate size and needs of the Board, including the annual nomination of
Directors and names of candidates to fill vacant Board positions. The
Committee reviews and makes recommendations concerning other policies related
to the Board and Directors, including compensation, committee composition,
structure and size, and retirement and resignation policies. The Committee is
responsible for the periodic review of the Company's Corporate Governance
Principles and other corporate governance issues and trends. Members of the
Governance and Nominating Committee are Messrs. Bridgewater (Chairman until
February 20, 2002), Addy, Lowther (Chairman after February 20, 2002), Mallardi
and Newman. The Governance and Nominating Committee met two times in 2001.
The Governance and Nominating Committee will consider nominations for
Director made by shareholders. Such nominations should be directed to the
Corporate Secretary.
7
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides information about the compensation paid by the
Company and its subsidiaries for services rendered during the periods shown for
the chief executive officer and the four most highly compensated executive
officers other than the chief executive officer who were serving at the end of
2001 (the "named executive officers").
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
----------------------- -----------------------------------
Awards Payouts
----------------------- -----------
Restricted Securities
Stock Underlying Long-Term All Other
Awards Options/ Incentive Compensation
Name and Principal Position Year Salary($) Bonus($) ($)(1) SARs (#) Payouts ($) ($)(2)
--------------------------- ---- --------- -------- ---------- ---------- ----------- ------------
T. M Hamilton................... 2001 500,000 -- -- -- -- 2,550
Chairman and President, 2000 500,000 300,000 331,369(3) 100,000 162,503(4) 2,550
Chief Executive Officer 1999 500,000 -- 315,650(5) 300,000 -- 2,400
D. R. Henderson................. 2001 272,000 -- -- -- -- 2,475
Executive Vice President 2000 262,000 217,600 -- 50,000 138,128(4) 2,475
and Chief Operating Officer 1999 262,000 -- 110,763(3) 130,000 -- 2,400
R. S. Langdon................... 2001 272,000 -- -- -- -- 2,506
Executive Vice President 2000 262,000 217,600 111,650(3) 60,000 40,628(4) 1,806
Finance and Administration and 1999 262,000 -- -- 130,000 -- 2,367
Chief Financial Officer
R. L. Edmonson.................. 2001 208,000 -- 30,660(6) -- -- 2,519
Senior Vice President, General 2000 100,000 156,000 47,000(7) 50,000 -- 1,063
Counsel and Corporate Secretary 1999 -- -- -- -- -- --
R. W. Oliver.................... 2001 210,000 189,000 -- -- -- 2,500
President, EEX Exploration and 2000 200,000 126,000 -- 5,000 -- 2,500
Production Company, LLC 1999 7,692 -- 68,750(8) 50,000 -- --
--------
(1) At December 31, 2001, the number and value (based upon the closing price on
December 31, 2001) of the aggregate restricted stock holdings for named
executives were as follows: T. M Hamilton, 71,099 shares, $130,822; D. R.
Henderson, 12,567 shares, $23,123; R. S. Langdon, 13,534 shares, $24,903;
R. L. Edmonson, 15,000 shares, $27,600; and R. W. Oliver, 25,000 shares,
$46,000. The Company does not currently pay dividends on Common Stock;
however, it would pay dividends on restricted stock shares at the same rate
paid on Common Stock. The restricted stock awards shown in this column are
valued at the closing price for the Company's Common Stock on the date of
grant.
(2) Includes Company's matching contributions under the Employee Stock Purchase
and Savings Plan for each of the executive officers.
(3) In December 1999, the Company offered to exchange for restricted stock all
employees' stock options with an exercise price greater than $20. The
amount of the exchange was computed using a Black-Scholes option pricing
model (using a risk-free interest rate of 6.1%, based on the average ten-
year Treasury strip rates for October and November 1999 and stock price
volatility of 49% based on the historical volatility using daily stock
prices over the prior ten years). Mr. Henderson accepted the offer on
December 27, 1999, and received 37,700 shares of restricted stock for stock
options for 146,667 shares. Mr. Langdon accepted the offer on January 3,
2000, and received 40,600 shares of restricted stock for stock options for
133,134 shares. The same offer was made to Mr. Hamilton on January 3, 2000,
and was accepted on January 11, 2000. Mr. Hamilton received 123,300 shares
of restricted stock for stock options for 463,334 shares. The restrictions
on the restricted stock exchanged are lifted as to one-third of the shares
each year beginning December 7, 2000 (January 3, 2001 for Mr. Hamilton),
subject to continued employment.
(4) These amounts represent restricted stock that was granted in 1997 subject
to performance-based restrictions and the passage of time. As of December
31, 2000, the performance requirement was met and the restrictions were
removed from the shares.
8
(5) Mr. Hamilton received a restricted stock award of 50,000 shares on
February 22, 1999. These shares are restricted for three years and subject
to continued employment; the restrictions are removed as to one-third of
the shares at the end of each successive year.
(6) Mr. Edmonson received a restricted stock award of 7,000 shares on February
20, 2001. These shares are restricted for three years and subject to
continued employment; the restrictions are removed as to one-third of the
shares at the end of each successive year.
(7) Mr. Edmonson received a restricted stock award of 8,000 shares on July 3,
2000 upon his employment. These shares are restricted for three years and
subject to continued employment; the restrictions are removed as to one-
third of the shares at the end of each successive year.
(8) Mr. Oliver received a restricted stock award of 25,000 shares on December
17, 1999 upon his employment. These shares are restricted for five years
and subject to continued employment, provided that the restrictions may be
removed as to one-fourth of the shares each year that the Company
performance is in the top 25% of peer group companies.
Option Grants
There were no options granted to the named executive officers in 2001.
Aggregated Option Exercise Table
The table below shows, for each of the named executive officers, the
information specified with respect to exercised, exercisable and unexercisable
options under all stock option plans.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares December 31, 2001 (#) December 31, 2001 ($)
Acquired On Value ------------------------- -------------------------
Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------ ------------ ----------- ------------- ----------- -------------
T. M Hamilton........... -- -- 396,667 33,333 -- --
D. R. Henderson......... -- -- 183,333 16,667 -- --
R. S. Langdon........... -- -- 190,000 20,000 -- --
R. L. Edmonson.......... -- -- 16,667 33,333 -- --
R. W. Oliver............ -- -- 36,666 18,334 -- --
Pension Plan Table
Employees of the Company participate in the Retirement Plan of EEX
Corporation (the "Plan") and a retirement income restoration plan (the
"Restoration Plan"). The table below illustrates the amount of annual benefit
payable on a normal retirement basis beginning at normal retirement age to a
person in specified average salary and years-of-service classifications under
the Plan and the Restoration Plan.
PENSION PLAN TABLE
Years of Service
---------------------------------------
Remuneration(1) 15 20 25 30 35
--------------- ------- ------- ------- ------- -------
200,000.............................. 48,314 64,418 80,523 96,627 112,732
275,000.............................. 68,001 90,668 113,335 136,002 158,669
350,000.............................. 87,689 116,918 146,148 175,377 204,607
425,000.............................. 107,376 143,168 178,960 214,752 250,544
500,000.............................. 127,064 169,418 211,773 254,502 296,482
575,000.............................. 146,751 195,668 244,585 293,502 342,419
650,000.............................. 166,439 221,918 277,398 332,877 388,357
725,000.............................. 186,126 248,168 310,210 372,252 434,294
800,000.............................. 205,814 274,418 343,023 411,627 480,232
--------
(1) Highest average covered compensation over any consecutive five-year
period.
9
Covered compensation is base wages, or the salary reported in the Summary
Compensation Table. The credited years of service under the Plan, as of March
31, 2002, for Messrs. Hamilton, Henderson, Langdon, Edmonson and Oliver are
5.2, 5.2, 5.0, 1.7, and 2.3 years, respectively, and the highest average
covered compensation during any consecutive five-year period for each of them
is $490,000, $261,967, $261,967, $204,952 and $204,876, respectively. Benefits
are computed under the "life only with ten years guaranteed" method and are
not subject to deductions or offset.
Compensation of Directors
The compensation program for non-employee Directors, effective January 1,
1999, provides for an annual award to continuing Directors at the time of each
annual meeting of the following:
. Restricted stock with a value of $50,000, provided that a Director may
elect to take up to 40% of the $50,000 in cash. The restrictions on the
shares lapse five years after the award, or upon the Director's death,
disability, mandatory retirement, resignation after age seventy, failure
to be reelected or a change in control of the Company. On May 22, 2001,
Messrs. Lowther, Mallardi and Newman were awarded 10,905 shares of
restricted stock, and Messrs. Addy and Bridgewater were awarded 6,543
shares of restricted stock and received $20,000.
. A stock option valued at $50,000 under the Black-Scholes method. The
stock option vests in six months, and expires ten years, after the date
of grant. On May 22, 2001, each of Messrs. Addy, Bridgewater, Lowther,
Mallardi and Newman were awarded a stock option for 19,920 shares with
an exercise price of $4.585 per share.
. A performance-based stock option that will vest, all, none or in part,
after three years if the Company achieves certain performance goals
during the three-year period. On May 22, 2001, the non-employee
Directors agreed to forego performance-based stock options for the year
2001.
. To the extent that there are not enough shares authorized under existing
plans to fulfill restricted stock grants to Directors, the restricted
grants to be made in 2002 will be prorated and the remainder of the
value paid in cash. In the event that the 2002 restricted stock grants
are prorated, Messrs. Bridgewater and Newman have elected not to accept
the cash for the remainder.
Employment Contracts and Termination of Employment and Change in Control
Agreements
Messrs. Hamilton, Henderson, Langdon and Edmonson have entered into
employment contracts with the Company providing for the employment of: Mr.
Hamilton as Chairman and President, Chief Executive Officer; Mr. Henderson as
Executive Vice President and Chief Operating Officer; Mr. Langdon as Executive
Vice President, Finance and Administration, and Chief Financial Officer; and
Mr. Edmonson as Senior Vice President, General Counsel and Corporate
Secretary. Each of the contracts is automatically extended for a two-year term
on a daily continuing basis. The contracts provided for a minimum annual
salary of $500,000 for Mr. Hamilton (lowered to $300,000 effective January 1,
2002, in accordance with Mr. Hamilton's recommendation), $250,000 for Mr.
Henderson, $250,000 for Mr. Langdon, and $200,000 for Mr. Edmonson, plus an
annual incentive bonus based upon performance goals set by the Compensation
Committee that are reasonably expected to yield a target bonus. In 2001, the
target bonuses for Messrs. Hamilton, Henderson, Langdon and Edmonson were 85%,
80%, 80% and 75%, respectively, of their annual base salaries. The contracts
also contain provisions relating to the grant of stock options and the award
of restricted stock. Each of Messrs. Hamilton, Henderson, Langdon and Edmonson
have executed change in control agreements ("CIC Agreements") with the Company
that provide certain benefits in the event their employment is terminated
subsequent to a change in control of the Company (as defined in the CIC
Agreements). The CIC Agreements are for continuous three-year terms until
terminated by the Company upon specified notice and continue for three years
following a change in control of the Company. The CIC Agreements provide that
if the officer is terminated or if the officer elects to terminate employment
under certain circumstances, within three years following a change in control
of the Company, the officer shall be entitled to a lump-sum severance payment
of three times the sum of the officer's base salary and target bonus, a
prorated bonus in the year of termination, the value over exercise price of
certain unexercised
10
stock options, a three-year continuation of employee benefits, the equivalent
of two years of service credit under the retirement program, and reimbursement
of certain legal fees, expenses, and any excise taxes. In the event the same
type of benefits or payments are payable under both the employment contracts
and the CIC Agreements, the officers will receive the higher benefit or
payment, but not duplicate benefits or payments.
Board Compensation Committee Report on Executive Compensation
The Compensation Committee is responsible for oversight and administration
of the Company's compensation policies and programs and specific salary,
incentive, stock option and long term incentive awards to the Chief Executive
Officer and the named executive officers. The Committee is composed entirely
of outside Directors. From time to time, the Committee has received advice on
competitive pay levels and practices from independent, recognized consultants.
It also reviews survey information on compensation collected by the Company
and obtained from industry groups of which the Company is a member.
Compensation Policies and Objectives. The Board Compensation Committee
develops and oversees compensation programs it believes are needed to enhance
shareholder value. The Committee has been guided by two primary objectives:
. Offer incentive for business success by putting a significant portion of
each executive's total pay at risk, based on Company performance.
. Attract and keep outstanding executives by providing compensation
opportunities consistent with or superior to those in the Company's
industry for similar positions.
The Company's compensation programs for executives are composed of the
following elements:
Base Salary Program. The Committee believes it is important to attract and
retain high-caliber executives and employees, and in order to do this, the
Company should attempt to pay fully competitive base salaries. The Committee
has determined that base salaries, as a matter of policy, should be targeted
at the 50th percentile of competitive levels for similarly qualified
executives and employees in independent oil and gas companies. Additional pay,
if any, should be through bonuses based on annual operating performance or
through stock programs, reflecting total shareholder return.
Salary levels for the executive officers are based upon assessment of each
individual's performance, experience and value in attaining corporate
financial and strategic objectives. The Committee compares the Company's
annual cash payments (both salary and annual incentive) for named executive
officers to recognized annual surveys of practice in its industry.
Based on the criteria discussed above, since Mr. Hamilton's employment as
Chief Executive Officer in January 1997, he has been paid a base salary of
$500,000 per year. He received no salary increase during 2001. At Mr.
Hamilton's recommendation, his base salary was lowered to $300,000 per year
effective January 1, 2002.
Incentive Plan Compensation. It is the practice of the Committee to
encourage positive annual operating results by annual incentive opportunities
that put a significant portion of total pay at risk. The portion of
compensation at risk is intentionally greater at higher executive levels in
the Company. The incentive plan implemented for 2001 included financial
targets and milestones related to exploration and development efficiency.
Based upon the Committee's review of performance with respect to the targets
and milestones, the Committee determined that, overall, the threshold level of
the incentive plan was met. However, as a result of the writedowns taken at
yearend 2001 and the performance of the Company's Common Stock during 2001,
the executive officers (other than Mr. Oliver) chose to not request or receive
any incentive compensation for 2001. Mr. Oliver, pursuant to a prior approved
retention plan, was awarded a bonus of $189,000.
The Committee has elected to continue the use of a goal-based incentive
plan for 2002. The plan is based upon measurable financial targets and
milestones.
11
Stock Incentive Plans. The Committee believes that stock-based compensation
programs are the single most important compensation vehicle available for
encouraging senior executives to maximize total shareholder return, and that
stock compensation can be an important part of the pay package for lower-level
employees as well.
In December 1999, the Committee reviewed the stock options outstanding to
all employees of the Company. In order to provide greater and more immediate
incentives to maximize total shareholder return and to provide retention of
key employees, the Committee decided to offer each holder an exchange of his
or her stock options with an exercise price greater than $20 for restricted
stock. The amount of the exchange was computed using a Black-Scholes option-
pricing model. Mr. Hamilton's exchange offer was made and effective in January
2000 and resulted in his receiving 123,300 shares of restricted stock in
exchange for stock options for 463,334 shares. Similarly, Mr. Langdon received
40,600 shares of restricted stock for stock options for 133,334 shares when he
accepted the offer in January 2000. Upon joining the Company in December 1999,
Mr. Oliver was granted 25,000 shares of restricted stock and stock options for
50,000 shares. The restrictions on the stock under each of these grants are
lifted, and the options vest, as to one-third of the shares each year
beginning one year after the date of grant, subject to continued employment.
In February 2000, the Committee awarded Mr. Hamilton a stock option grant
for 100,000 shares as a part of the senior executive incentive compensation
determinations. Mr. Henderson, Mr. Langdon and Mr. Oliver received stock
option grants of 50,000 shares; 60,000 shares; and 5,000 shares, respectively.
Upon joining the Company in July 2000, Mr. Edmonson was awarded a stock option
grant of 50,000 shares. The exercise price of each of these options equaled
the fair market value of the shares on the date the options were granted. One-
third of these options will vest each year beginning one year after the date
of grant. Mr. Edmonson was granted 8,000 shares of restricted stock in July
2000 and 7,000 shares of restricted stock in February 2001. The restrictions
on the stock are lifted as to one-third of the shares each year beginning one
year after the date of grant, subject to continued employment. No further
grants were awarded to senior executives in 2001.
Peer Group Selection. In May 1998, the Committee designated a peer group of
companies. These companies (taking into account mergers and acquisitions that
have occurred within the group) continue to reflect those who most closely
resemble the Company in assets and focus, and/or are among those that analysts
routinely compare to the Company: Anadarko Petroleum Corp., Apache Corp.,
Burlington Resources, Inc., EOG Resources, Inc., Forest Oil Corp., Newfield
Exploration Co., Noble Affiliates, Inc., Ocean Energy Inc., Pioneer Natural
Resources Co., and POGO Producing Co.
Section 162(m). No formal policy has been adopted by the Company with
respect to qualifying compensation paid to its executive officers for
deductibility under Section 162(m) of the Internal Revenue Code. The Committee
intends to consider tax deductibility as one relevant factor in making future
awards to executives but may decide that other factors outweigh the
preservation of deductibility.
Dated: March 28, 2002 Compensation Committee
M.P. Mallardi, Chairman
F.S. Addy
B.A. Bridgewater, Jr.
F.M. Lowther
H.H. Newman
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Messrs. Mallardi, Addy, Bridgewater, Lowther and Newman served as members
of the Compensation Committee during 2001. Mr. Addy served as interim Chairman
and Chief Executive Officer from September 10, 1996 to January 13, 1997, and
as President from October 30, 1996 to January 13, 1997.
Mr. Newman became a Director in January 1999 and a member of the
Compensation Committee in February 1999. In January 1999, the Company issued
1.5 million shares of Series B 8% Cumulative Perpetual Preferred
12
Stock (the "Preferred Stock"), and warrants to acquire 21 million shares of
Common Stock to Warburg, Pincus Equity Partners, L.P. and certain affiliated
partnerships ("WPEP") in exchange for $150 million. The sole general partner
of WPEP is Warburg, Pincus & Co., a New York general partnership ("WP").
Warburg Pincus, L.L.C., a New York limited liability company ("WP LLC"),
manages WPEP. The members of the WP LLC are substantially the same as the
partners of WP. Mr. Newman is a Vice Chairman, Managing Director and member of
WP LLC and a general partner of WP. In addition, these shares of Preferred
Stock, together with warrants owned by WPEP, (or a pro rata portion thereof),
upon the occurrence of a Change in Control, may, at the option of WPEP, be
exchanged for 27,907,050 shares of Common Stock (subject to pro rata reduction
if only a portion of the Preferred Stock and warrants are exchanged and
subject to anti-dilution adjustments); provided that under certain
circumstances, the Company may elect to pay WPEP cash in lieu of shares of
Common Stock.
13
Performance Graph
Set forth below is a line graph comparing the percentage change in the
cumulative total return to shareholders on the Company's Common Stock since
December 31, 1996 against (i) the cumulative total return of the S&P 500
Composite Stock Index and (ii) the Company's peer group consisting of Anadarko
Petroleum Corp., Apache Corp., Burlington Resources, Inc., EOG Resources,
Forest Oil Corp., Newfield Exploration Co., Noble Affiliates, Inc., Ocean
Energy Inc., Pioneer Natural Resources Co., and POGO Producing Co. The graph
assumes that the value of the investment in the Company's Common Stock, the
index and peer group was $100 at December 31, 1996 and that all dividends are
reinvested.
[PERFORMANCE GRAPH APPEARS HERE]
Cumulative Total Return
-----------------------------------------
12/96 12/97 12/98 12/99 12/00 12/01
------ ------ ------ ------ ------ ------
EEX Corporation....................... 100.00 77.13 19.86 8.33 13.83 6.22
S&P 500............................... 100.00 133.36 171.47 207.56 188.66 166.24
Peer Group............................ 100.00 87.83 63.77 70.04 136.36 109.15
14
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the officers
and directors of the Company and persons who own more than 10% of a registered
class of the equity securities of the Company to file reports of beneficial
ownership and changes in beneficial ownership with the SEC and the New York
Stock Exchange. Based solely on its review of the copies of such reports
received by it, or written representations from certain reporting persons that
no Forms 5 were required for those persons, the Company believes that during
2001 its officers, directors and shareholders holding greater than 10% of the
Company's Common Stock complied with all applicable filing requirements.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On the recommendation of the Audit Committee, the Board of Directors has,
subject to ratification by the shareholders, appointed Ernst & Young LLP as
independent Certified Public Accountants of the Company for the year 2002.
Ernst & Young LLP has been the Company's independent auditors since September
1997. Neither the firm nor any of its members has any direct financial
interest or any material indirect financial interest in the Company or any of
its affiliates. A representative of Ernst & Young LLP is expected to be
present at the Annual Meeting. The representative will be provided the
opportunity to make a statement and will be available to respond to
appropriate questions.
Audit Fees
Fees billed by Ernst & Young LLP for the last audit of annual financial
statements and reviews of financial statements included in the Company's Forms
10-Q during 2001 were $245,000.
Financial Information Systems Design and Implementation Fees
No fees were billed by Ernst & Young LLP for services related to financial
information systems design and implementation.
All Other Fees
All other fees billed by Ernst & Young LLP were $498,000 and included
audit-related services (generally fees for audits and reviews of subsidiary
financial statements and for the proposed debt financing) and severance tax
assistance. The Audit Committee has considered whether the provision of these
services is compatible with maintaining Ernst & Young LLP's independence.
Ratification of the appointment of Ernst & Young LLP as independent
auditors for the year 2002 requires the majority of the votes cast on this
proposal. The Board of Directors recommends that the shareholders vote "FOR"
the ratification of Ernst & Young LLP as independent auditors.
SOLICITATION OF PROXIES
This solicitation is being made by the Company. The cost of preparing,
assembling and mailing the Notice of Annual Meeting, Proxy Statement, and
Proxy, and the cost of further solicitation are to be borne by the Company.
Solicitations may further be made by directors, officers, and regular
employees of the Company, without additional compensation, through use of the
mails, telephone, facsimile transmission, or personal interview. No additional
compensation will be paid for such solicitation. The Company will reimburse
brokerage firms and others for their reasonable expenses in forwarding
solicitation materials to beneficial owners of the Company's Common Stock. The
Company has retained W. F. Doring & Co. at a cost of approximately $4,000 to
assist in the solicitation of proxies.
15
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the Company's Proxy Statement
relating to its 2003 Annual Meeting, the Company must receive a shareholder's
proposal no later than December 30, 2002. Such proposals should be addressed to
the Corporate Secretary.
The Company's Bylaws provide that in addition to any other applicable
requirements, in order for a shareholder to properly bring business before an
annual meeting or nominate a person for election to the Board, the shareholder
must give timely written notice to the Corporate Secretary and provide certain
specified information. The Company anticipates that the 2003 Annual Meeting of
Shareholders will be held on May 20, 2003. Based upon that date, to be timely,
advance notice of any shareholder nominations of directors and of any
shareholder proposal must be delivered to or mailed and received at the
Company's principal executive offices on or before March 31, 2003, but no
earlier than March 6, 2003. If a shareholder fails to provide timely notice of
a proposal to be presented at the 2003 Annual Meeting, the Company's management
will have discretionary authority with respect to proxies submitted to the 2003
Annual Meeting of Shareholders on any such proposal. Details regarding the
procedural requirements for presenting a matter before a meeting of
shareholders are available upon written request to the Corporate Secretary.
OTHER MATTERS
The Board of Directors does not intend to bring any other business before
the meeting and has no reason to believe any will be presented to the meeting.
If, however any other business should be properly presented at the meeting, the
proxies named in the enclosed form of proxy will vote the proxy in accordance
with their best judgment.
AVAILABILITY OF FORM 10-K
Shareholders may obtain without charge another copy of the Company's Annual
Report on Form 10-K (excluding certain of the exhibits thereto) for the fiscal
year ended December 31, 2001, as filed with the Securities and Exchange
Commission, by writing to the Corporate Secretary, EEX Corporation, 2500
CityWest Blvd., Suite 1400, Houston, TX 77042.
By order of the Board of Directors
Richard L. Edmonson
Senior Vice President,
General Counsel, and
Corporate Secretary
Houston, Texas
April 29, 2002
16
Attachment A
EEX CORPORATION
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to assist the Board in
monitoring (1) the integrity of the financial statements of the Corporation,
(2) the compliance by the Corporation with legal and regulatory requirements
and (3) the independence and performance of the Corporation's internal and
external auditors.
The members of the Audit Committee shall meet the independence and
experience requirements of the New York Stock Exchange. The members of the
Audit Committee shall be appointed by the Board on the recommendation of the
Governance and Nominating Committee.
The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee
policy is that the Corporation shall not hire as an employee any partner or
manager of the independent auditor who has worked on the Corporation account
within the previous three (3) year period. The Audit Committee may request any
officer or employee of the Corporation or the Corporation's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and submit
it to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles and
practices as well as the adequacy of internal controls that could
significantly affect the Corporation's financial statements.
3. Review an analysis prepared by management and the independent auditor
of significant financial reporting issues and judgments made in connection
with the preparation of the Corporation's financial statements.
4. Review with management and the independent auditor the Corporation's
quarterly financial statements prior to the release of quarterly earnings
(such review may be delegated to the Chairman of the Committee).
5. Meet periodically with management to review the Corporation's major
financial risk exposures and the steps management has taken to monitor and
control such exposures.
6. Review major changes to the Corporation's auditing and accounting
principles and practices as suggested by the independent auditor, internal
auditors or management.
7. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the Board.
During the selection process, the Committee shall require the independent
auditor to provide a statement of the qualifications of the partners who
will be responsible for the audit of the Corporation.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and if so
determined by the Audit Committee, recommend that the Board take
appropriate action to insure the independence of the auditor.
10. Evaluate the performance of the independent auditor and, if so
determined by the Audit Committee, recommend that the Board replace the
independent auditor.
A-1
11. Review the appointment and replacement of the senior internal
auditing executive.
12. Review the significant reports to management prepared by the
internal auditing department and management's responses.
13. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
14. Obtain from the independent auditor assurance that Section 10A of
the Private Securities Litigation Reform Act of 1995 has not been
implicated.
15. Obtain reports from management, the Corporation's senior internal
auditing executive and the independent auditor that the Corporation's
subsidiary/foreign affiliated entities are in conformity with applicable
legal requirements and the Corporation's Statement of Operating Policy and
Procedures.
16. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct
of the audit.
17. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the Corporation's response to that letter. Such review should
include:
(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information.
(b) Any changes required in the planned scope of the internal audit.
(c) The internal audit department responsibilities, budget and
staffing.
18. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Corporation's annual proxy
statement.
19. Advise the Board with respect to the Corporation's policies and
procedures regarding compliance with applicable laws and regulations and
with the Corporation's Statement of Operating Policy and Procedures.
20. Review with the Corporation's General Counsel legal matters that may
have a material impact on the financial statements, the Corporation's
compliance policies and any material reports or inquiries received from
regulators or governmental agencies.
21. Meet at least annually with the chief financial officer, the senior
internal auditing executive and the independent auditor in separate
executive sessions.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Corporation's financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct investigations,
to resolve disagreements, if any, between management and the independent
auditor or to assure compliance with laws and regulations and the
Corporation's Statement of Operating Policy and Procedures.
A-2
PROXY This Proxy is Solicited on Behalf of the Board of Directors PROXY
For the Annual Meeting of Shareholders of
EEX CORPORATION
To be Held on May 30, 2002
The undersigned hereby appoints T. M Hamilton and Richard L. Edmonson, or
either of them, as the lawful agents and Proxies of the undersigned (with all
the powers the undersigned would possess if personally present, including full
power of substitution), and hereby authorizes them to represent and to vote,
as designated below, all the shares of Common Stock of EEX Corporation held of
record by the undersigned on April 1, 2002, at the Annual Meeting of
Shareholders of EEX Corporation to be held at 2500 CityWest Blvd., Houston,
Texas 77042 at 1:00 p.m. on May 30, 2002, or any adjournment or postponement
thereof.
It is understood that when properly executed, this proxy will be voted in the
manner directed herein by the undersigned shareholder. Where no choice is
specified by the Shareholder, the proxy will be voted "FOR" the nominees for
director in No. 1 and "FOR" the proposal set forth in No. 2, on the reverse
side of this Proxy.
The undersigned hereby revokes all previous proxies relating to the shares of
Common Stock covered hereby and confirms all that the above-named Proxies may
do by virtue hereof.
(Continued and to be signed on reverse side)
----- EEX Corporation -----
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY 0
[ ]
For Withhold For 3. In their discretion, the Proxies are authorized
1. ELECTION OF DIRECTORS-- Both Both Except* to vote upon any matters which may properly
| F. S. Addy and H. H. Newman 0 0 0 come before the Annual Meeting, or any |
| adjournment or postponement thereof. |
----------------------------
*Nominee Exception (print name) Dated: _____________________________________ , 2002
2. RATIFY THE APPOINTMENT OF ERNST & For Against Abstain ---------------------------------------------------
YOUNG LLP AS INDEPENDENT AUDITORS. 0 0 0
---------------------------------------------------
Signature of Shareholder(s)
This proxy must be signed exactly as the name
appears hereon. Executors, administrators,
trustees, etc., should give full title as such.
If the signer is a corporation, please sign full
corporate name by duly authorized officer.
----- -----