<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
PLAINS RESOURCES INC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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:
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(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 transactions:
-------------------------------------------------------------------------
(5) Total fee paid:
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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
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(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 June 7, 2000
TO THE STOCKHOLDERS OF PLAINS RESOURCES INC.:
The 2000 Annual Meeting of Stockholders of Plains Resources Inc. (the
"Company") will be held in the Imperial West Room at the Hyatt Regency Hotel,
1200 Louisiana Street, Houston, Texas at 10:30 a.m., local time, on Wednesday,
June 7, 2000, 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 May 5, 2000, 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
May 11, 2000
YOU ARE RESPECTFULLY REQUESTED TO PROMPTLY SIGN, DATE AND RETURN THE ENCLOSED
PROXY IN THE ENCLOSED RETURN ENVELOPE.
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[This Page Intentionally Left Blank]
<PAGE>
PLAINS RESOURCES INC.
500 Dallas Street
Houston, Texas 77002
PROXY STATEMENT
2000 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 2000 Annual Meeting of Stockholders of the
Company (the "Meeting") to be held in the Imperial West Room at the Hyatt
Regency Hotel,1200 Louisiana Street, Houston, Texas at 10:30 a.m., local time,
on Wednesday, June 7, 2000, 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 May 11, 2000. The Company's Annual Report to
Stockholders for the fiscal year ended December 31, 1999, including consolidated
financial statements, which accompanies this Proxy Statement, is not a part of
the proxy soliciting material.
The close of business on May 5, 2000 (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 17,979,237 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
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Greg L. Armstrong, age 41 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 60 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.
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Tom H. Delimitros, age 59 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).
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William M. Hitchcock, age 60 Director since 1977
Mr. Hitchcock has been President of Pembroke Capital LLC (an investment firm)
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. Mr. Hitchcock
is a Partner of Pembroke Capital, LLC, (an investment firm). He is also
a director of Maxx Petroleum, Ltd. (an oil and gas company), Thoratec
Laboratories Corporation (a medical device company), Oshman's Sporting Goods,
Inc. (a sporting goods retailer) and Luna Imaging, Inc. (a digital imaging
company).
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Dan M. Krausse, age 74 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), and was Chairman of the Board of Longhorn Partners
Pipeline, LP from 1994 to 1998.
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John H. Lollar, age 61 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 Lufkin Industries, Inc. (a manufacturing firm).
-2-
<PAGE>
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Robert V. Sinnott, age 50 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).
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J. Taft Symonds, age 60 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).
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Board Organization and Meetings
During 1999, the Board held four regularly scheduled Board meetings and
nine special meetings. Committees of the Board held a total of six meetings to
address normal recurring business. Subcommittees and Committee Chairmen of the
Board committees met informally throughout the year to consult with management
on various matters. 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 three meetings in 1999. 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. Dees, Delimitros,
Hitchcock and Lollar, held one meeting in 1999. 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, Hitchcock, Sinnott, and
Symonds, held one meeting during 1999. 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, Krausse, Lollar, and
Symonds, did not meet formally in 1999. 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 2000
Annual Meeting of Stockholders should submit, by January 14, 2001, 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 (a "Non-
employee Director") receives an annual retainer of $16,000, 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 the annual
retainer and attendance fees for regular Board meetings, with the number of
shares granted being determined by dividing the amount of such retainer or
attendance fee by the per share market price of the Common Stock on the date
such amount is payable to the director. 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,
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<PAGE>
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, in 1999 each Non-employee Director received an
annual stock option to purchase 10,000 shares of Common Stock for a five year
term at 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. Mr. Krausse, as Chairman of the Board, receives an annual
retainer of $60,000, payable in equal monthly installments but does not receive
any meeting attendance fees. Mr. Krausse also received the annual stock option
described above.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth as of April 20, 2000 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.............................. 299,628 1.6%
Jerry L. Dees.................................. 35,759 (2)
Tom H. Delimitros.............................. 49,444 (2)
William M. Hitchcock........................... 494,727 2.7%
Dan M. Krausse................................. 69,353 (2)
John H. Lollar................................. 50,912 (2)
Robert V. Sinnott (3).......................... 85,429 (2)
J. Taft Symonds................................ 86,733 (2)
William C. Egg, Jr............................. 250,591 1.4%
Phillip D. Kramer.............................. 193,756 1.1%
Michael R. Patterson........................... 147,921 (2)
Harry N. Pefanis............................... 155,606 (2)
Directors and Executive
Officers as a group (15 persons).............. 2,071,745 10.6%
_______________
(1) Includes both outstanding shares of Common Stock and shares of Common Stock
such person has the right to acquire within 60 days after April 20, 2000 by
exercise of outstanding stock options. Shares subject to exercisable stock
options include 268,000 for Mr. Armstrong; 35,000 for Mr. Dees; 110,000 for
Mr. Hitchcock; 25,000 for Mr. Krausse; 245,250 for Mr. Egg; 187,250 for Mr.
Kramer;130,588 for Mr. Patterson; 150,750 for Mr. Pefanis and 45,000 each
for Messrs. Delimitros, Lollar, Sinnott and Symonds. Also includes the
following shares of Common Stock issuable upon conversion of Series G
Cumulative Convertible Preferred Stock ("Series G Preferred Stock"): 1,774
for Mr. Delimitros; 70,993 for Mr. Hitchcock; 3,549 for Mr. Lollar; 35,946
for Mr. Sinnott; and 14,198 for Mr. Symonds.
(2) Less than 1%.
(3) Mr. Sinnott is Senior Vice President of Kayne Anderson Investment
Management, Inc., the general partner of KAIM Non-Traditional, L.P. Mr.
Sinnott disclaims beneficial ownership of the shares held by KAIM Non-
Traditional, L.P.
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<PAGE>
The following table lists the only persons who, to the knowledge of the
Company, may be deemed to be beneficial owners, as of April 20, 2000 of more
than 5% of the Company's Common Stock.
Shares
Beneficially Percent
Beneficial Owner Owned of Class
---------------- ----- --------
Advisory Research, Inc...................... 1,220,667 (1) 6.6%
and David B. Heller
Two Prudential Plaza
180 N. Stetson, Suite 5780
Chicago, IL 60601
EnCap Energy Capital Fund III, L.P.......... 3,693,203 (2) 17.0%
EnCap Energy Capital Fund III-B, L.P.
Energy Capital Investment Company PLC
BOCP Energy Partners, L.P.
1100 Louisiana St., Suite 3150
Houston, TX 77002
FMR Corp.................................... 1,038,400 (3) 5.8%
82 Devonshire Street
Boston, MA 02109
Arthur E. Hall and Hallco Inc............... 1,210,235 (4) 6.7%
1726 Cedarwood Drive
Minden, NV 89423
KAIM Non-Traditional L.P.................... 6,217,371 (5) 29.1%
and Richard A. Kayne
1800 Avenue of the Stars, Second Floor
Los Angeles, CA 90067
Schroder Capital Management, Inc............ 954,600 5.31%
787 Seventh Avenue - 34/th/ Floor
New York, NY 10019
Shell Land & Energy Company................. 1,082,000 (6) 5.7%
and Shell Oil Company
One Shell Plaza
Houston, TX 77002
State Street Research & Management Company.. 1,804,258 (7) 10.0%
One Financial Center, 30/th/ Floor
Boston, MA 02111-2690
Strome Investment Management, L.P.,......... 1,322,017 (8) 7.1%
SSCO, Inc., and Mark E. Strome
100 Wilshire Blvd., Suite 1500
Santa Monica, CA 90401
____________
(footnotes to table continued on next page)
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<PAGE>
(1) Advisory Research, Inc. and David B. Heller have shared voting and
dispositive power for these shares. Includes 569,667 shares of Common Stock
issuable upon conversion of shares of Series G Preferred Stock.
(2) Includes 1,774,836 shares issuable upon conversion of Series G Preferred
Stock and 1,918,367 shares issuable upon conversion of Series F Cumulative
Convertible Preferred Stock ("Series F Preferred Stock").
(3) As reported on Schedule 13G filed February 14, 2000, FMR Corp. has sole
voting power for 156,400 shares and sole dispositive power for 1,038,400
shares
(4) Includes 58,570 shares issuable upon conversion of Series G Preferred Stock
and 163,265 shares issuable upon conversion of Series F Preferred Stock.
(5) KAIM Non-Traditional LP and Mr. Kayne have shared voting and dispositive
power for 5,897,574 shares held by investment partnerships and managed
accounts. Mr. Kayne has sole voting and dispositive power for 319,797
shares which he holds individually. Total includes 101,350 shares of Common
Stock issuable upon the exercise of a warrant, and 2,173,373 and
1,126,531 shares issuable upon conversion of shares of Series G Preferred
Stock and Series F Preferred Stock, respectively.
(6) Includes 932,000 shares issuable upon the conversion of Series D Cumulative
Convertible Preferred Stock and 150,000 shares issuable upon the exercise
of a warrant.
(7) As reported on Schedule 13G filed April 5, 2000, filed by State Street
Research & Management Company. According to such report, State Street had
sole dispositive power for 1,804,258 shares and the sole voting power for
1,667,958 shares. State Street advised that all such shares are owned by
various clients.
(8) Includes 452,519 and 244,898 shares issuable upon conversion of shares of
Series G Preferred Stock and Series F Preferred Stock, respectively.
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;
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<PAGE>
. 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 13. 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.
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.
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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
In May 1999, the Board increased Mr. Armstrong's bonus for 1998 by an
additional $1 million in recognition of Mr. Armstrong's exemplary leadership in
the significant transactions consummated in 1998 that enabled the Company to
enter 1999 well positioned to not only weather extremely difficult industry
conditions, but also to take advantage of growth opportunities, as evidenced by
the Company's activities and achievements in early 1999.
In light of the substantial unauthorized trading losses recently incurred
by Plains All American Pipeline, L.P., a limited partnership of which a wholly
owned subsidiary of the Company is the general partner and majority interest
owner, Mr. Armstrong voluntarily advised the Board that he would not accept, if
granted, an annual incentive compensation award for 1999 or a salary increase
for 2000.
Deductibility of Compensation Expenses
Section 162(m) of the Internal Revenue Code generally precludes the Company
from taking federal income tax deductions for compensation paid to certain
executive officers in excess of $1 million per year, unless such excess
constitutes performance-based compensation under such section. The Company's
policy is, primarily, to design and administer compensation plans which support
the achievement of long-term strategic objectives and enhance shareholder value.
Where it is consistent with this compensation philosophy, the Committee will
also attempt to structure compensation programs that are tax-deductible by the
Company.
Compensation Committee
John H. Lollar, Chairman
Jerry L. Dees
Tom H. Delimitros
William M. Hitchcock
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows certain compensation information for the
Company's Chief Executive Officer and the other Named Executive Officers for
services rendered in all capacities during the fiscal years ended December 31,
1999, 1998 and 1997.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Long Term Compensation
-----------------------
Awards Payouts
---------- ---------
Shares All Other
Annual Compensation Underlying LTIP Compensation
-------------------
Name and Principal Position Year Salary ($) Bonus ($) Options Payouts ($) ($) (4)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Greg L. Armstrong 1999 330,000 -0- 25,000 137,271 (2) 10,000
President and Chief 1998 302,500 450,000 (1) 50,000 -0- 10,000
Executive Officer 1,550,000 (1)
1997 275,000 400,000 50,000 -0- 9,500
- -----------------------------------------------------------------------------------------------------------------------
William C. Egg, Jr. 1999 235,000 -0- 45,000 -0- 10,000
Executive Vice President- 1998 222,500 240,000 35,000 -0- 10,000
Exploration and Production 1997 210,000 250,000 35,000 -0- 9,500
- ----------------------------------------------------------------------------------------------------------------------
Phillip D. Kramer 1999 200,000 -0- 35,000 -0- 10,000
Executive Vice President, 1998 187,500 750,000 (3) 50,000 -0- 10,000
Chief Financial Officer and 1997 165,625 180,000 50,000 -0- 9,500
Treasurer
- -----------------------------------------------------------------------------------------------------------------------
Michael R. Patterson 1999 175,000 -0- 22,000 -0- 10,000
Vice President, 1998 162,500 500,000 (3) 16,000 -0- 10,000
General Counsel and 1997 150,000 75,000 16,000 -0- 9,500
Secretary
- -----------------------------------------------------------------------------------------------------------------------
Harry N. Pefanis 1999 235,000 -0- 10,000 273,534 (2) 10,000
Executive Vice President 1998 210,000 400,000 (1) 31,000 -0- 10,000
and President of Plains 1,200,000 (1)
All American Inc. 1997 185,000 300,000 31,000 -0- 9,500
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Messrs. Armstrong's and Pefanis' 1998 cash bonuses are each comprised of
two amounts consisting of (i) annual bonuses of $450,000 and $400,000,
respectively, related to the achievement of annual results and (ii)
transaction related bonuses of $1.55 million and $1.2 million,
respectively, associated with the achievement of the five year strategic
objective which culminated with PAA's initial public offering ("IPO").
One-half of Mr. Pefanis' $1.2 million bonus was paid in 1998 on the closing
of the IPO, with the remaining one-half being paid in 1999.
(2) Represents the value of 8,333 and 16,667 common units of Plains All
American Pipeline, L.P. ("PAA"), plus distribution equivalent rights with
respect to such common units which vested under Transaction Grant
Agreements with Messrs. Armstrong and Pefanis, respectively. These
Transaction Grants to Messrs. Armstrong and Pefanis vest as to 8,333 and
16,666 units, respectively, in each of the years ending December 31, 1999,
2000, and 2001, if the Operating Surplus generated by PAA in such year
equals or exceeds the amount necessary to pay the Minimum Quarterly
Distribution on all outstanding common units and the related distribution
on the general partner interest. If a tranche of common units does not vest
in a particular year, such common units will vest at the time the common
unit arrearages for such year have been paid. In addition, approximately
16,666 and 8,333 of such common units will vest in Messrs. Armstrong and
Pefanis, respectively, in each of the years ending December 31, 1999, 2000
and 2001 if the Operating Surplus generated in such year exceeds the amount
necessary to pay the Minimum Quarterly Distribution on all outstanding
Common Units and Subordinated Units and the related distribution on the
general partner interest. Any common units remaining unvested shall vest
upon, and in the same proportion as, the conversion of the Subordinated
Units . Notwithstanding the foregoing, if prior to January 1, 2002, Plains
All American Inc. is removed as General Partner of PAA, all common units
under these grants will vest as of the date of such removal. Capitalized
terms used and not otherwise defined herein are defined in the partnership
agreement of PAA.
(Footnotes to table continued on next page)
-9-
<PAGE>
(Continued footnotes to table on prior page)
(3) A significant portion of the 1998 bonus amounts for Messrs. Kramer and
Patterson is related to the consummation of PAA's IPO and related
acquisition and financing transactions.
(4) 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).
Option Grants in 1999
The following table provides information regarding stock options that were
granted to the Named Executive Officers during 1999. 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>
- ----------------------------------------------------------------------------------------------------------
Number of % of Total Potential Realizable Value at
Securities Options Assumed Annual Rates
Underlying Granted to Exercise of Stock Price Appreciation
Options Employees Price Expiration for Option Term
----------------------------------
Name Granted in 1999 $/Share Date 5% ($) 10% ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Greg L. Armstrong 25,000 (1) 10.5 14.1875 4/15/2004 98,062 (2) 216,562 (3)
- ----------------------------------------------------------------------------------------------------------
William C. Egg, Jr. 45,000 (1) 19.0 14.3125 4/12/2004 178,087 (4) 393,187 (5)
- ----------------------------------------------------------------------------------------------------------
Phillip D. Kramer 35,000 (1) 14.8 14.3125 4/12/2004 138,512 (4) 305,812 (5)
- ----------------------------------------------------------------------------------------------------------
Michael R. Patterson 22,000 (1) 9.3 14.3125 4/12/2004 87,065 (4) 192,225 (5)
- ----------------------------------------------------------------------------------------------------------
Harry N. Pefanis 10,000 (1) 4.2 14.3125 4/12/2004 39,575 (4) 87,375 (5)
- ----------------------------------------------------------------------------------------------------------
All Stockholders (6) N/A N/A N/A N/A 66,920,882 (4) 147,750,146 (5)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) These options were granted in April 1999 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.
(Footnotes to table continued on next page)
-10-
<PAGE>
(Continued footnotes to table on prior page)
(2) The 5% rate of appreciation would result in a per share price of $18.11.
(3) The 10% rate of appreciation would result in a per share price of $22.85.
(4) The 5% rate of appreciation would result in a per share price of $18.27.
(5) The 10% rate of appreciation would result in a per share price of $23.05.
(6) Based upon 16,909,888 shares of the Company's Common Stock outstanding on
April 12, 1999 (the grant date of four of the five options set forth in the
foregoing table) using a base price of $14.3125 which is equal to the
exercise price of the options granted on such date.
Year-End Option Values
AGGREGATED OPTION EXERCISES IN 1999
AND YEAR-END OPTION VALUES
The following table sets forth information for each of the Named Executive
Officers concerning the exercise of options during 1999 and the aggregate dollar
value of in-the-money, unexercised options held at December 31, 1999. (SEC
Regulations define options as "in-the-money" if the fair market value of the
underlying security on such date exceeds the exercise price of the option.)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money Options
Shares Options At Year-End At Year-End (2)
-----------------------------------------------------------
Acquired Value Realized
Name on Exercise ($) (1) Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Greg L. Armstrong 30,000 354,375 193,000 -0- 1,167,188 -0-
- -----------------------------------------------------------------------------------------------------------------
William C. Egg, Jr. N/A N/A 179,000 -0- 1,065,625 -0-
- -----------------------------------------------------------------------------------------------------------------
Phillip D. Kramer N/A N/A 101,000 -0- 583,625 -0-
- -----------------------------------------------------------------------------------------------------------------
Michael R. Patterson 15,912 180,005 99,588 -0- 614,444 -0-
- -----------------------------------------------------------------------------------------------------------------
Harry N. Pefanis N/A N/A 107,000 -0- 606,063 -0-
- -----------------------------------------------------------------------------------------------------------------
</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 market price on the exercise date.
(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, 2002 (unless extended pursuant to the terms thereof) and provides for a
current base salary of $330,000 per year,
-11-
<PAGE>
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 an
employment agreement with Mr. Egg for an initial term of five years providing
for a current base salary of $235,000, subject to annual review. As authorized,
such employment agreement will have termination and change in control provisions
substantially similar to those in Mr. Armstrong's agreement.
The Company also has an employment agreement with Mr. Pefanis, pursuant to
which Mr. Pefanis serves as Executive Vice President of the Company as well as
President and Chief Operating Officer of Plains All American Inc., the General
Partner of PAA, and is responsible for the overall operations of PAA. The
employment agreement provides that the Company will not require Mr. Pefanis to
engage in activities that materially detract from his duties and
responsibilities as an officer of the General Partner. The employment agreement
has an initial term of three years (commencing on November 23, 1998) subject to
annual extensions and includes confidentiality, nonsolicitation and noncompete
provisions, which, in general, will continue for 24 months following Mr.
Pefanis' termination of employment. The agreement provides for an annual base
salary of $235,000, subject to annual review. If Mr. Pefanis' employment is
terminated without cause, he will be entitled to receive an amount equal to two
times his base salary. Upon a change in control of the Company or a Marketing
Operations Disposition (as such terms are defined in the employment agreement),
the term of the employment agreement will be automatically extended for three
years, and if Mr. Pefanis' employment is terminated during the one-year period
following either event by him for a Good Reason or by Plains Resources other
than for death, disability or Cause (as such terms are defined in the employment
agreement), he will be entitled to a lump sum severance amount equal to three
times the sum of (i) his highest rate of annual base salary and (ii) the largest
annual bonus paid during the three preceding years.
As described in footnote (1) to the table entitled "Option Grants in 1999",
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.
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.
-12-
<PAGE>
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. 121, "Independent - Oil & Gas" ("MG Group Index") and
AMEX Market Index for five years ended December 31, 1999. The graph assumes that
the value of an investment in the Company's Common Stock and each index was $100
at December 31, 1994 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
[PERFORMANCE CHART APPEARS HERE]
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
Plains Resources Inc. 100.00 167.44 290.70 319.77 261.63 232.56
MG Group Index 100.00 109.42 141.00 131.27 85.03 119.12
AMEX Market Index 100.00 128.90 136.01 163.66 161.44 201.27
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires
directors, executive officers and beneficial owners of more than ten percent of
a class of the Company's equity securities to file with the SEC
-13-
<PAGE>
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 Forms 5 were
required, the Company believes that during the fiscal 1999 year all persons
subject to the filing requirements of Section 16(a) filed the required reports
on a timely basis except for Mr. Pefanis who did not file two Forms 4 for two
transactions on a timely basis. These transactions were reported on a Form 5
filed in February 2000.
AUDITORS
The Board has selected PricewaterhouseCoopers LLP as the Company's
independent accountants for 2000. PricewaterhouseCoopers is an international
accounting firm and has audited the Company's financial statements since 1977.
A representative of PricewaterhouseCoopers 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 2001 ANNUAL MEETING
Proposals of stockholders intended to be presented at the Company's 2001
Annual Meeting must be received by the Company's Secretary on or before January
14, 2001, 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
May 11, 2000
-14-
<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 Imperial West Room at the
Hyatt Regency Hotel, Houston, Texas, on June 7, 2000, at 10:30 a.m., local
time, and any adjournment or postponement thereof.
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:
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: _____________________________, 2000
__________________________________________
__________________________________________
Signature(s) of Stockholder(s)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF THE COMPANY.
