<PAGE>
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
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PLAINS RESOURCES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PLAINS RESOURCES INC.
500 DALLAS STREET
HOUSTON, TEXAS 77002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
TO THE STOCKHOLDERS OF PLAINS RESOURCES INC.:
The 1998 Annual Meeting of Stockholders of Plains Resources Inc. (the
"Company") will be held in the Arboretum Room at the Hyatt Regency Hotel, 1200
Louisiana Street, Houston, Texas at 10:00 a.m., local time, on Thursday, May 21,
1998, for the following purposes:
1. To elect eight directors; and
2. To transact any other business properly brought before the meeting
and any adjournment thereof.
Only stockholders of record at the close of business on March 27, 1998,
will receive notice of and be entitled to vote at the meeting and any
adjournment thereof.
By Order of the Board of Directors,
Michael R. Patterson
Vice President, General Counsel & Secretary
April 29, 1998
YOU ARE RESPECTFULLY REQUESTED TO PROMPTLY SIGN, DATE AND RETURN THE ENCLOSED
PROXY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>
PLAINS RESOURCES INC.
500 DALLAS STREET
HOUSTON, TEXAS 77002
PROXY STATEMENT
1998 ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Plains Resources Inc. (the "Company") of
the enclosed proxy to be used at the 1998 Annual Meeting of Stockholders of the
Company (the "Meeting") to be held in the Arboretum Room at the Hyatt Regency
Hotel, 1200 Louisiana Street, Houston, Texas at 10:00 a.m., local time, on
Thursday, May 21, 1998, and at any adjournment of such Meeting. You are
respectfully requested to sign, date and return the enclosed proxy in the
enclosed return envelope as soon as possible.
This Proxy Statement and the enclosed proxy were first sent or given to
Company stockholders on or about April 29, 1998. The Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1997, including consolidated
financial statements, which accompanies this Proxy Statement, is not a part of
the proxy soliciting material.
The close of business on March 27, 1998 (the "Record Date"), was fixed as
the Record Date for determination of stockholders of the Company entitled to
notice of and to vote at the Meeting and any adjournment thereof. On the Record
Date, the outstanding stock of the Company entitled to vote at the Meeting
consisted of 16,745,207 shares of common stock, par value $.10 per share
("Common Stock").
Holders of Common Stock on the Record Date are entitled to cast one vote
per share, either in person or by proxy, on all questions properly before the
stockholders at the Meeting. All properly executed proxies returned by holders
of Common Stock that are not revoked will be voted (or withheld from voting)
according to the directions, if any, specified thereon. However, if proxies of
holders of Common Stock are returned properly signed but without voting
instructions, such proxies will be voted for the election of the nominees listed
under "Election of Directors - Nominees for Election to the Board of Directors".
Except as set forth herein, the Board is not aware of any other matters that are
to be brought before the Meeting. However, if any other matters properly come
before the Meeting, the persons named in the enclosed form of proxy, or their
substitutes, will vote the proxy in accordance with their judgment on such
matters.
A proxy given pursuant to this solicitation may be revoked by a stockholder
at any time before it is voted by delivering to the Company a duly executed
instrument of revocation or a proxy bearing a later date or by voting the shares
relating thereto in person at the Meeting. Attendance at the Meeting will not
in and of itself constitute revocation of a proxy. Other than the election of
directors, which requires a plurality of the votes cast, each matter submitted
to the stockholders requires the affirmative vote of a majority of the shares
present or represented by proxy and entitled to vote at the Meeting.
Abstentions have the effect of a vote against a proposal and broker non-votes
(i.e., when a broker does not have authority to vote on a specific proposal)
have no effect on the vote.
This solicitation is being made by mail. After the initial solicitation,
further solicitations of proxies may be made by telephone or oral communications
by officers or employees of the Company who will receive no extra compensation
therefor. The Company will bear the entire cost of this solicitation, which
will include reimbursement to brokerage houses, banks, and other fiduciaries for
their reasonable expenses in forwarding proxy materials to their principals.
<PAGE>
ELECTION OF DIRECTORS
The Board consists of eight members who are elected annually to serve until
the next Annual Meeting of Stockholders or until their respective successors are
elected and qualified. The nominees for election as directors are identified
below. Although all nominees currently intend to serve on the Board, if any
nominee is unable or unwilling to serve, the Board may (a) nominate another
person in substitution for such nominee, and the proxies will be voted for the
election of such substitute nominee for director or (b) reduce the size of the
Board accordingly. All nominees are incumbent directors.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
GREG L. ARMSTRONG, age 39 Officer since 1981 and Director since 1992
Mr. Armstrong has been President and Chief Executive Officer of the Company
since December 1992. He was President and Chief Operating Officer from October
to December 1992, and Executive Vice President and Chief Financial Officer from
June to October 1992. He was Senior Vice President and Chief Financial Officer
from 1991 to 1992, Vice President and Chief Financial Officer from 1984 to 1991,
Corporate Secretary from 1981 to 1988 and Treasurer from 1984 to 1987.
- --------------------------------------------------------------------------------
JERRY L. DEES, age 58 Director since 1997
Mr. Dees retired in 1996 as Senior Vice President, Exploration and Land, for
Vastar Resources, Inc. (previously ARCO Oil and Gas Company), a position he had
held since 1991. From 1987 to 1991, he was Vice President of Exploration and
Land for ARCO Alaska, Inc., and from 1985 to 1987 held various positions as
Exploration Manager of ARCO. From 1980 to 1985, he was Manager of Exploration
Geophysics for Cox Oil and Gas Producers.
- --------------------------------------------------------------------------------
TOM H. DELIMITROS, age 57 Director since 1988
Mr. Delimitros has been General Partner of AMT Venture Funds (a venture capital
firm) since 1989. He was a General Partner of Sunwestern Investment Funds and
Senior Vice President of Sunwestern Management, Inc. (an investment management
firm) from 1983 to 1988. He is also a director of Tetra Technologies, Inc. (a
specialty chemical and chemical process company).
- --------------------------------------------------------------------------------
WILLIAM M. HITCHCOCK, age 58 Director since 1977
Mr. Hitchcock has been President of Avalon Financial, Inc. (a private investment
company) since December 1996. He was President of Plains Resources
International Inc. (a wholly owned subsidiary of the Company) from 1992 to 1995.
He was Chairman of the Board of the Company from August 1981 to October 1992,
except for the period from April 1987 to October 1987 when he served as Vice
Chairman. He was a consultant to the Company from 1982 to 1992. He is also a
director of Thoratec Laboratories Corporation (a medical device company) and
Oshman's Sporting Goods, Inc. (a sporting goods retailer).
- --------------------------------------------------------------------------------
DAN M. KRAUSSE, age 72 Director since 1987
Mr. Krausse has been Chairman of the Board of the Company since December 1992.
He has also been President of The Krausse Company (a private investment firm)
since 1981, and was Chairman of the Board and Chief Executive Officer of
Sunwestern Investment Group (a venture capital firm) from 1983 to 1987. He is
also President and Chairman of the Board of Trinity Energy L.P. (an energy
investment partnership).
- --------------------------------------------------------------------------------
JOHN H. LOLLAR, age 59 Director since 1995
Mr. Lollar has been the Managing Partner of Newgulf Exploration L. P. since
December 1996. He was Chairman of the Board, President and Chief Executive
Officer of Cabot Oil & Gas Corporation from 1992 to 1995. He was President and
Chief Operating Officer of Transco Exploration Company from 1982 to 1992. He is
also a director of Inspectorate PLC (a private independent inspection services
company) and Lufkin Industries, Inc. (a manufacturing firm).
- --------------------------------------------------------------------------------
-2-
<PAGE>
- --------------------------------------------------------------------------------
ROBERT V. SINNOTT, AGE 48 Director since 1994
Mr. Sinnott has been Senior Vice President of Kayne Anderson Investment
Management, Inc. (an investment management firm) since 1992. He was Vice
President and Senior Securities Officer of the Investment Banking Division of
Citibank from 1986 to 1992. He is also a director of Glacier Water Services,
Inc. (a vended water company) and National Energy Group, Inc. (an oil and
natural gas company).
- --------------------------------------------------------------------------------
J. TAFT SYMONDS, age 58 Director since 1987
Mr. Symonds has been Chairman of the Board of Symonds Trust Co. Ltd. (an
investment firm), and Chairman of the Board of Maurice Pincoffs Company, Inc.
(an international marketing firm) since 1978. He is also Chairman of the Board
of Tetra Technologies, Inc. (a specialty chemical and chemical process company)
and a director of Denali, Inc. (a manufacturer of storage tanks and a product
and service provider for handling of industrial fluids).
- --------------------------------------------------------------------------------
BOARD ORGANIZATION AND MEETINGS
During 1997, the Board held seven Board meetings and the committees of the
Board held a total of six meetings. No director attended fewer than 75% of the
total number of meetings of the Board and the committees of which he was a
member. The committees of the Board consist of the Audit, Compensation, Finance,
and Corporate Governance Committees. The Audit Committee, consisting of Messrs.
Dees, Delimitros and Sinnott, held two meetings in 1997. The Audit Committee's
function is to consult with the Company's independent auditors jointly with, and
independently of, the management of the Company with respect to the scope and
results of their audit of the Company's financial statements and to review the
Company's financial reporting and accounting principles, policies and practices
and its internal audit objectives, accounting and control policies and
procedures. The Compensation Committee, consisting of Messrs. Delimitros,
Hitchcock and Lollar, held two meetings in 1997. The function of the
Compensation Committee is to recommend salaries, bonuses, deferred compensation,
retirement plans and any other remuneration for the officers of the Company to
the Board for its approval, and to administer the Company's stock option plans.
The Finance Committee, consisting of Messrs. Armstrong, Lollar, Sinnott, and
Symonds, held one meeting during 1997. The Finance Committee's function is to
advise and assist the Company's management on financial matters and recommend to
the Board all major financing undertaken, both debt and equity. The Corporate
Governance Committee, consisting of Messrs. Armstrong, Hitchcock, Krausse, and
Symonds, held one meeting in 1997. The Corporate Governance Committee's function
is to review and evaluate all matters relating to Board process and
effectiveness and to consider the requisite qualifications for Board service.
The Corporate Governance Committee will also consider nominees recommended by
stockholders. Stockholders desiring to make such recommendations for the 1999
Annual Meeting of Stockholders should submit, by December 31, 1998, the
candidate's name, together with biographical information to: Chairman, Corporate
Governance Committee, c/o Plains Resources Inc., 500 Dallas Street, Suite 700,
Houston, Texas 77002.
COMPENSATION OF DIRECTORS
Each director who is not otherwise compensated by the Company ("Non-
employee Director") receives an attendance fee of $2,000 for each Board meeting
attended (excluding telephonic meetings) plus reimbursement for related
expenses, and an attendance fee of $500 for each committee meeting or telephonic
Board meeting attended. A Non-employee Director may elect to receive a grant of
shares of Common Stock in lieu of attendance fees for regular Board meetings,
with the number of shares granted being determined by dividing the amount of the
attendance fee earned by the per share market price of the Common Stock on the
date of the meeting. Each Non-employee Director who serves as a chairman of a
Board committee receives an annual fee of $2,000, or at such director's
election, in lieu of such fee, a grant of shares of Common Stock, the number of
which is determined by dividing such fee by the per share market price of the
Common Stock on the date on which such director was appointed as a committee
chairman. In addition, each Non-employee
-3-
<PAGE>
Director will receive annually a stock option to purchase 10,000 shares of
Common Stock for a five year term and an exercise price equal to the market
price of the Common Stock on the grant date. Mr. Armstrong, as an employee, is
otherwise compensated for his services to the Company and therefore receives no
separate compensation for his services on the Board. In lieu of the compensation
set forth above for Non-employee Directors, Mr. Krausse, as Chairman of the
Board, receives an annual retainer of $60,000, payable in equal monthly
installments.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth as of the Record Date certain information
concerning the Common Stock beneficially owned by (i) the directors and
nominees, (ii) the Chief Executive Officer and the four other most highly
compensated executive officers of the Company (the "Named Executive Officers")
and (iii) the directors, nominees and all executive officers as a group.
SHARES
BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED (1) OF CLASS
- ---------------- ------------ --------
Greg L. Armstrong........................................ 227,616 1.3%
Jerry L. Dees............................................ 10,000 (2)
Tom H. Delimitros........................................ 26,144 (2)
William M. Hitchcock..................................... 398,834 2.4%
Dan M. Krausse........................................... 70,420 (2)
John H. Lollar........................................... 22,141 (2)
Robert V. Sinnott........................................ 24,511 (3) (2)
J. Taft Symonds.......................................... 50,260 (2)
William C. Egg, Jr....................................... 183,378 1.1%
Phillip D. Kramer........................................ 118,069 (2)
Michael R. Patterson..................................... 121,249 (2)
Harry N. Pefanis......................................... 107,663 (2)
Directors and Executive
Officers as a group (14 persons)...................... 1,435,628 8.1%
(1) Includes both outstanding shares of Common Stock and shares of Common Stock
such person has the right to acquire within 60 days after the Record Date by
exercise of outstanding stock options. Shares subject to exercisable stock
options include 224,250 for Mr. Armstrong; 10,000 for Mr. Dees; 85,000 for
Mr. Hitchcock; 30,000 for Mr. Krausse; 178,750; for Mr. Egg; 113,250 for Mr.
Kramer; 114,000 for Mr. Patterson; 106,500 for Mr. Pefanis and 20,000 each
for Messrs. Delimitros, Lollar, Sinnott and Symonds.
(2) Less than 1%.
(3) Mr. Sinnott is Sr. Vice President of Kayne Anderson Investment Management,
Inc., the general partner of KAIM Non-Traditional, L.P. Mr. Sinnott
disclaims beneficial ownership of the 3,195,328 shares held by KAIM Non-
Traditional, L.P.
-4-
<PAGE>
The following table lists the only persons who, to the knowledge of the
Company, may be deemed to be beneficial owners, as of the Record Date, of more
than 5% of the Company's Common Stock.
SHARES
BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
- ---------------- ------------- ---------
Advisory Research, Inc........................ 867,200 (1) 5.2%
and David B. Heller
Two Prudential Plaza
180 N. Stetson, Suite 5780
Chicago, IL 60601
KAIM Non-Traditional, L.P..................... 3,195,328 (2) 19.0%
and Richard A. Kayne
1800 Avenue of the Stars, Second Floor
Los Angeles, CA 90067
J.P. Morgan & Co. Incorporated............... 1,058,500 (3) 6.3%
60 Wall Street
New York, NY 10260
Shell Land & Energy Company................... 1,082,000 (4) 6.1%
and Shell Oil Company
One Shell Plaza
Houston, TX 77002
State Street Research & Management Company.... 1,697,313 (5) 10.1%
One Financial Center, 30/th/ Floor
Boston, MA 02111-2690
Strome Susskind Investment Management, L.P.,.. 1,282,841 (6) 7.7%
SSCO, Inc., and Mark E. Strome
1250 4th Street, Suite 420
Santa Monica, CA 90401
(1) As reported on Schedule 13G dated February 13, 1998, jointly filed by
Advisory Research, Inc. and David B. Heller.
(2) Based on data provided by KAIM Non-Traditional L.P. Includes 66,667 shares
of Common Stock issuable upon the exercise of a warrant.
(3) As reported on Schedule 13G dated December 31, 1997, filed by J.P. Morgan &
Co., Incorporated. According to such report, this stockholder had sole power
to dispose of all such shares and the sole power to vote 885,000 of such
shares.
(4) As reported on Schedule 13D dated November 21, 1997, filed by Shell Land &
Energy Company and Shell Oil Company. Includes 932,000 shares of Common
Stock issuable upon the conversion of the Company's Series D Cumulative
Convertible Preferred Stock and 150,000 shares of Common Stock issuable upon
the exercise of a warrant.
(5) As reported on Schedule 13G dated February 11, 1998, filed by State Street
Research & Management Company. According to such report, State Street had
sole power to dispose of all such shares and the sole right to vote
1,194,613 of such shares. State Street advised that all such shares are
owned by various clients.
(6) As reported on Schedule 13G, Amendment No. 3, dated February 11, 1998, filed
jointly by Strome Susskind Investment Management L. P., SSCO, Inc. and Mark
E. Strome.
-5-
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, which is composed of three independent, Non-
employee Directors, makes determinations and recommendations to the Board
concerning the compensation of the Company's executive officers, except for
grants under the Company's stock option plans, which plans are independently
administered by the Committee. In order to make such determinations and
recommendations, at the end of each year the Committee evaluates (i) the
Company's performance relative to its annual objectives, (ii) the Company's
performance relative to changes in the industry (i.e., performance relative to
the opportunities available), and (iii) each executive officer's contribution to
the Company's achievements during the year. The basic objectives of the
executive compensation program are to:
. Enable the Company to attract, retain, motivate and reward high
caliber executive officers who are among the most skilled, talented
and persistent individuals available in a very competitive
marketplace;
. Inspire executive officers to work as a team to innovatively and
aggressively pursue Company goals;
. Foster a general corporate atmosphere that promotes an entrepreneurial
style of leadership in order to enable the Company to act quickly and
flexibly to implement its plans and pursue opportunities as they
arise;
. Emphasize "pay for performance" by having a significant portion of the
executive officers' total compensation "at risk" in the form of
incentive compensation; and
. Align the long term interests of the executive officers with those of
the Company's stockholders through the use of stock options as a
portion of compensation and thereby encourage the achievement of
performance objectives that enhance stockholder value on a continuing
basis.
The Committee monitors general industry conditions, changes in regulations
and tax laws and other developments which may, from time to time, require
modifications of the executive compensation program in order to ensure the
program is properly structured to achieve its objectives. The Company's
executive compensation program currently is comprised of three major components;
base salary, annual incentive compensation and longer term incentives through
stock options.
BASE SALARIES
Base salaries for each of the Company's executive officers are determined
on an individual basis, taking into consideration the performance of the
individual and his or her contributions to the Company's performance, the length
of service of the individual with the Company, compensation by industry
competitors for comparable positions, internal equities among positions and
general economic conditions. Although no specific weight is assigned to these
factors, the Committee generally targets the mid-point range of salary levels
paid within the industry as a primary consideration in setting base salaries. In
order to determine salary levels paid within the industry, the Committee reviews
various industry surveys, proxy information of its competitors and also, from
time to time, consults with independent compensation consulting firms. The
Committee reviews the compensation practices of the companies which are most
comparable to the Company in terms of asset value and which are included in the
Media General Index - Oil and Natural Gas Exploration used in the Performance
Graph on Page 11. The Committee believes that maintaining a competitive base
salary structure is vital to attract and retain talented executives and that
optimal performance is encouraged through the use of incentive programs, such as
annual incentive compensation and stock option plans, furthering the goal of
having "at risk" compensation as an important component of the executive
compensation program.
-6-
<PAGE>
ANNUAL INCENTIVE COMPENSATION
In addition to their base salaries, the Company's executive officers may
earn an annual incentive payment, depending on Company performance relative to
certain objectives set forth in an annual business plan. Such annual objectives
are a combination of operating, financial and strategic goals (such as oil and
gas production levels, oil and gas reserve additions, achievement of income
and/or cash flow targets and successful completion of major projects) that are
considered to be critical to the Company's success. These objectives are not
specifically weighted in the determination of whether to award annual incentive
payments to executive officers since the relative importance of such objectives
may change from year to year and the relative responsibilities of each executive
officer in the achievement of each of the objectives may differ. After a year-
end review of the Company's performance relative to the annual business plan,
the Committee determines the amount of the annual incentive payment, if any,
which will be awarded to an executive officer based on its subjective evaluation
of factors which include the extent to which the objectives of the annual
business plan were achieved, his or her contribution to the achievement of those
objectives, and general economic and industry conditions.
STOCK OPTIONS
The Company for many years has used stock options as its long-term
incentive program for executive officers. Stock options are used in order to
relate the benefits received by the executive officers to the amount of
appreciation realized by the stockholders over comparable periods. Stock options
are generally granted annually to executive officers. The size of the option
grant to an executive officer is generally determined by dividing the total cash
compensation paid to the officer for the prior year (salary plus annual
incentive payment) by an average market price of the Common Stock during the
prior year. Stock options are granted at exercise prices not less than the
market value of the stock on the date of the grant and are not transferable.
Therefore, such options have no realizable value unless the Company's stock
appreciates in value. Stock options provide the executive officers the
opportunity to acquire and build a meaningful ownership interest in the Company
and, therefore, closely align the executive officers' interests with those of
the stockholders.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation of Mr. Armstrong for 1997 was determined in accordance
with the executive compensation practices for all executive officers as
discussed above. In its annual review of the Company's performance in 1997
relative to its business plan, the Committee determined that substantially all
of the material objectives of what the Board considered an aggressive business
plan were met. Significant achievements included a 32% increase in proved oil
and gas reserve volumes, a 15% increase in oil and gas production, a 637%
reserve replacement ratio, a 16% increase in cash flow, and a 19% increase in
earnings before interest, taxes, depreciation and amortization, as compared to
correlative results for 1996. In recognition of Mr. Armstrong's exemplary
leadership in the Company's significant progress in 1997, Mr. Armstrong was
awarded an annual incentive payment of $400,000. Mr. Armstrong also received the
option grants described under "Option Grants in 1997".
COMPENSATION COMMITTEE
John H. Lollar, Chairman
Tom H. Delimitros
William M. Hitchcock
-7-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows certain compensation information for the
Company's Chief Executive Officer and the other Named Executive Officers for
services rendered in all capacities during the fiscal years ended December 31,
1997, 1996 and 1995.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION NUMBER OF SECURITIES ALL OTHER
---------------------- UNDERLYING OPTION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) AWARDS ($) (1)
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Greg L. Armstrong 1997 275,000 400,000 50,000 9,500
President and Chief 1996 241,666 300,000 345,000 9,500
Executive Officer 1995 225,000 140,000 50,000 8,812
- ------------------------------------------------------------------------------------------------------------------
William C. Egg, Jr. 1997 210,000 250,000 35,000 9,500
Senior Vice President- 1996 193,333 210,000 236,000 9,500
Exploration and Production 1995 185,000 100,000 35,000 8,779
- ------------------------------------------------------------------------------------------------------------------
Phillip D. Kramer 1997 165,625 180,000 50,000 9,500
Senior Vice President, Chief 1996 150,000 150,000 26,000 9,500
Financial Officer and Treasurer 1995 150,000 55,000 20,000 7,508
- ------------------------------------------------------------------------------------------------------------------
Michael R. Patterson 1997 150,000 75,000 16,000 9,500
Vice President, 1996 150,000 40,000 22,000 9,500
General Counsel and Secretary 1995 150,000 27,000 20,000 8,379
- ------------------------------------------------------------------------------------------------------------------
Harry N. Pefanis 1997 185,000 300,000 31,000 9,500
Senior Vice President and 1996 185,000 185,000 33,000 9,500
President of Plains Marketing 1995 150,000 115,000 30,000 7,477
& Transportation Inc.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company matches 100% of an employee's contribution to the Company's
401(k) Plan (subject to certain limitations in the plan), with such
matching contribution being made 50% in cash and 50% in Common Stock (the
number of shares for the stock match being based on the market value of the
Common Stock at the time the shares are granted).
-8-
<PAGE>
OPTION GRANTS IN 1997
The following table provides information regarding stock options that were
granted to the Named Executive Officers during 1997. The amounts shown as
potential realizable values are based on assumed annualized rates of stock price
appreciation of 5% and 10% over the term of the options as required by the
regulations of the Securities and Exchange Commission ("SEC"). No gain to the
optionees is possible without an increase in stock price which will benefit all
stockholders proportionately. For comparative purposes, also shown are the total
gains that could be realized over a five-year period (the term of the options)
by the Company's stockholders based on the same assumptions. There can be no
assurance that the potential realizable values shown in this table will be
achieved.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------------
NAME GRANTED IN 1997 $/SHARE DATE 5% ($) 10% ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Greg L. Armstrong 50,000 (1) 15.5 15.50 2/6/2002 214,000 (3) 473,000 (4)
- ---------------------------------------------------------------------------------------------------------------
William C. Egg, Jr. 35,000 (1) 10.8 15.50 2/6/2002 149,800 (3) 331,100 (4)
- ---------------------------------------------------------------------------------------------------------------
Phillip D. Kramer 25,000 (1) 7.7 15.50 2/6/2002 107,000 (3) 236,500 (4)
25,000 (2) 7.7 14.375 5/21/2002 99,375 (5) 219,375 (6)
- ---------------------------------------------------------------------------------------------------------------
Michael R. Patterson 16,000 (1) 4.9 15.50 2/6/2002 68,480 (3) 151,360 (4)
- ---------------------------------------------------------------------------------------------------------------
Harry N. Pefanis 31,000 (1) 9.6 15.50 2/6/2002 132,680 (3) 293,260 (4)
- ---------------------------------------------------------------------------------------------------------------
All Stockholder (7) N/A N/A N/A N/A 70,784,776 (3) 156,454,201 (4)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These options were granted on February 6, 1997 under the Company's 1996
Stock Incentive Plan, and the right to exercise vests in equal annual
installments over a four year period. To the extent not already exercisable,
these options generally become exercisable upon a change of control of the
Company resulting from (i) a change in the composition of the Board of
Directors pursuant to which persons who were directors in February 1996 (or
were approved by a majority of those directors still remaining) cease to
constitute at least two-thirds of the Board, (ii) dissolution or liquidation
of the Company, (iii) a merger or consolidation in which the Company does
not survive, or (iv) the transfer of 20% or more of the voting power of the
Company's stock (except in a transaction approved by the Board or as a
result of a merger or consolidation in which the Company is the surviving
corporation). In addition, in the event of such a change in control, the
holders of the option may elect to surrender for a cash payment equal to the
difference between the exercise price and the market price of the Company's
Common Stock on the date of such event. These options are not transferable
except by will or the laws of descent and distribution.
(2) This option was granted May 21, 1997, under the Company's 1996 Stock
Incentive Plan and the right to exercise vested for 25% of the shares
covered thereby on the grant date with the remaining 75% vesting in equal
annual installments over a three year period. This option is subject to the
same change of control provisions which are described in footnote (1).
(3) The 5% rate of appreciation would result in a per share price of $19.78.
(4) The 10% rate of appreciation would result in a per share price of $24.96.
(5) The 5% rate of appreciation would result in per share price of $18.35.
(6) The 10% rate of appreciation would result in a per share price of $23.15.
(7) Based upon 16,538,499 shares of the Company's Common Stock outstanding on
February 6, 1997, the grant date of the options described under footnote
(1), using a base price of $15.50 which is equal to the exercise price of
the options granted on such date.
-9-
<PAGE>
AGGREGATED OPTION EXERCISES IN 1997
AND YEAR-END OPTION VALUES
The following table sets forth information for each of the Named Executive
Officers concerning the exercise of options during 1997 and the aggregate dollar
value of in-the-money, unexercised options held at December 31, 1997. (SEC
Regulations define options as "in-the-money" if the fair market value of the
underlying security on such date exceeds the exercise price of the option.)
<TABLE>
<CAPTION> NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END AT YEAR-END (2)
ACQUIRED VALUE REALIZED -------------------------------------------------------
NAME ON EXERCISE ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Greg L. Armstrong 25,000 265,625 200,500 372,500 2,142,188 1,401,563
- ----------------------------------------------------------------------------------------------------------------
William C. Egg, Jr. 15,000 159,375 161,000 253,000 1,735,937 965,313
- ----------------------------------------------------------------------------------------------------------------
Phillip D. Kramer 12,000 127,500 94,250 56,750 952,766 216,797
- ----------------------------------------------------------------------------------------------------------------
Michael R. Patterson 10,500 110,375 104,500 27,000 1,127,313 130,125
- ----------------------------------------------------------------------------------------------------------------
Harry N. Pefanis 13,000 138,125 90,500 47,500 952,938 207,000
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Value Realized is determined by multiplying the number of shares acquired on
exercise of the options by the spread between the exercise price and the
price received for the sale of such shares.
(2) Year-end Value is determined by multiplying the number of shares underlying
the options by the spread between the exercise price of such options and the
year-end market price of the Common Stock.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has an employment agreement with Mr. Armstrong which expires on
March 1, 2001 (unless extended pursuant to the terms thereof) and provides for a
current base salary of $275,000 per year, subject to annual review. If Mr.
Armstrong's employment is terminated (i) without cause, he will be entitled to
receive an amount equal to two times his base salary, or (ii) as a result of a
change in control of the Company, he will be entitled to receive an amount equal
to three times the aggregate of his base salary and bonus, and in either event,
will be entitled to receive medical benefits for two years following the date of
such termination. Under such agreement, change in control of the Company is
defined as a change occurring (i) through the acquisition of 25% or more of the
voting power of the Company, or (ii) at such time as the directors in office on
the date of the agreement cease to constitute a majority of the Board. The Board
has also authorized employment agreements with Messrs. Egg and Pefanis for
initial terms of five years providing for current base salaries of $210,000 and
$185,000, respectively, subject to annual review. As authorized, such employment
agreements will have termination and change in control provisions substantially
similar to those in Mr. Armstrong's agreement.
As described in footnotes (1) and (2) to the table entitled "Option Grants
in 1997", in the event of certain corporate transactions, changes in control and
changes in the composition of the Board of Directors under certain
circumstances, the exercisability of certain options granted to the Named
Executive Officers is accelerated. If the exercisability of options granted
under the Company's 1992 and 1996 Stock Incentive Plans is accelerated, the
option holders are afforded the right to surrender the options for a lump sum
cash payment.
-10-
<PAGE>
OFFICERS' RETIREMENT PLAN
In 1996, the Board authorized the implementation of a retirement plan for
executive officers. Such plan provides that an officer with at least fifteen
years of service to the Company will be entitled to receive retirement income
for a fifteen-year period, commencing at age 60, in an amount equal to 50% of
his salary on May 23, 1996. Assuming continued employment until age 60, each of
the Named Executive Officers will have at least 15 years of service and will be
entitled to receive annual benefits in the following amounts: Mr. Armstrong
$112,500; Mr. Egg - $92,500; Mr. Kramer - $75,000; Mr. Patterson - $75,000; and
Mr. Pefanis - $92,500.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock with the cumulative total return of the Media General
Industry Group Index No. 353, "Oil, Natural Gas Exploration" ("MG Group Index")
and AMEX Market Index for five years ended December 31, 1997. The graph assumes
that the value of an investment in the Company's Common Stock and each index was
$100 at December 31, 1992, and that any dividends were reinvested. Numerical
values used for the year-end plot points in the graph are set forth in the table
under the graph.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG PLAINS RESOURCES INC.,
MG GROUP INDEX AND AMEX MARKET INDEX
[GRAPH APPEARS HERE]
1992 1993 1994 1995 1996 1997
------ ------ ------ ------ ------ ------
Plains Resources Inc. 100.00 70.27 58.11 97.30 168.92 185.81
MG Group Index 100.00 119.56 120.85 141.37 192.97 209.15
AMEX Market Index 100.00 118.81 104.95 135.28 142.74 171.76
-11-
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires
directors, executive officers and persons who beneficially own more than ten
percent of a class of the Company's equity securities to file with the SEC and
the American Stock Exchange initial reports of ownership and reports of changes
in ownership of the Company's equity and derivative securities. Based solely
upon a review of the copies of the forms furnished to the Company, or written
representations from certain reporting persons that no Form 5 were required, the
Company believes that during the fiscal 1997 year all persons subject to the
filing requirements of Section 16(a) filed the required reports on a timely
basis.
AUDITORS
The Board has selected Price Waterhouse as the Company's independent
accountants for 1998. Price Waterhouse is an international accounting firm and
has audited the Company's financial statements since 1977.
A representative of Price Waterhouse will be present at the Meeting, will
have an opportunity to make a statement if he desires to do so, and will be
available to respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Company's 1999
Annual Meeting must be received by the Company's Secretary on or before December
31, 1998, to be considered for inclusion in the Company's proxy statement and
form of proxy for such meeting.
By Order of The Board of Directors,
Michael R. Patterson
Vice President, General Counsel & Secretary
April 29, 1998
-12-
<PAGE>
PROXY PLAINS RESOURCES INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Phillip D. Kramer and Michael R. Patterson, and
each of them, as Proxies with full power of substitution, and hereby authorizes
them to represent and to vote, as designated below, all of the shares of Common
Stock of Plains Resources Inc. which the undersigned may be entitled to vote at
the Annual Meeting of Stockholders to be held in the Arboretum Room of the Hyatt
Regency Hotel, Houston, Texas, on May 21, 1998, at 10:00 a.m., local time, and
any adjournment or postponement thereof.
<TABLE>
<CAPTION>
<S> <C>
1. ELECTION OF DIRECTORS [_] FOR ALL NOMINEES LISTED BELOW (EXCEPT AS MARKED TO THE CONTRARY BELOW)
[ ] WITHHOLD FOR ALL NOMINEES LISTED BELOW
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S
NAME IN THE FOLLOWING LIST:
</TABLE>
GREG L. ARMSTRONG, JERRY L. DEES, TOM H. DELIMITROS, WILLIAM M. HITCHCOCK,
DAN M. KRAUSSE, JOHN H. LOLLAR, ROBERT V. SINNOTT AND J. TAFT SYMONDS
2. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
(Continued and to be signed on the other side)
- --------------------------------------------------------------------------------
(Continued from the other side)
In his discretion, the Proxy is authorized to vote upon such other business as
may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1.
Please sign exactly as your name appears on
the left. If signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such; if signing for
corporation, sign in full corporate name by
authorized officer; and if signing for a
partnership, sign in the partnership name by
authorized person. When shares are in the
names of more than one person, each should
sign.
Date:_______________________________, 1998.
-------------------------------------------
-------------------------------------------
Signature(s) of Stockholder(s)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF THE COMPANY.
