<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
____________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30,
1995, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _______ to _______
COMMISSION FILE NUMBER 1-8241
____________
PRESIDIO OIL COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 95-3049484
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
5613 DTC PARKWAY, SUITE 750
ENGLEWOOD, COLORADO 80111-3065
(Address of principal executive offices) (Zip Code)
(303) 773-0100
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 10, 1995:
CLASS A COMMON STOCK: 25,318,085
CLASS B COMMON STOCK: 3,216,585
1
<PAGE> 2
PRESIDIO OIL COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Unaudited Consolidated Financial Statements:
Unaudited Consolidated Balance Sheets -
September 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Unaudited Consolidated Statements of Operations -
For the Three Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . 5
Unaudited Consolidated Statements of Operations -
For the Nine Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . 6
Unaudited Consolidated Statements of Cash Flows -
For the Nine Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . 7
Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
(in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,543 $ 6,423
Accounts receivable:
Oil and gas sales 3,644 6,759
Joint interest owners and other 2,880 6,828
Other 1,086 1,203
-------- --------
Total current assets 16,153 21,213
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties using full
cost accounting 510,938 511,870
Other 4,379 4,268
-------- --------
Total 515,317 516,138
Less accumulated depletion,
depreciation and amortization 298,949 287,463
-------- --------
Net property, plant and equipment 216,368 228,675
-------- --------
OTHER ASSETS:
Deferred charges 8,469 8,055
Other 1,170 1,629
-------- --------
Total other assets 9,639 9,684
-------- --------
$242,160 $259,572
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE> 4
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
(in thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable:
Oil and gas sales $ 2,009 $ 3,368
Trade and other 5,765 12,724
Accrued interest 16,275 3,576
Other accrued liabilities 5,302 5,413
Current portion of long-term debt 246,413 -
-------- --------
Total current liabilities 275,764 25,081
-------- --------
BANK DEBT - 21,000
-------- --------
SENIOR SECURED NOTES - 75,000
-------- --------
GAS INDEXED NOTES - 100,000
-------- --------
CONVERTIBLE SUBORDINATED DEBENTURES - 50,000
-------- --------
OTHER NONCURRENT LIABILITIES 10,977 9,039
-------- --------
STOCKHOLDERS' DEFICIT:
Class A Common stock, $.10 par value per share;
25,318,000 and 25,317,000 shares outstanding
at September 30, 1995 and December 31, 1994,
respectively 2,532 2,532
Class B Common stock, $.10 par value per share;
3,217,000 and 3,218,000 shares outstanding
at September 30, 1995 and December 31, 1994,
respectively 322 322
Additional paid-in capital 128,835 129,029
Deferred compensation (2,064) (2,394)
Retained deficit (174,206) (150,037)
-------- --------
Total stockholders' deficit (44,581) (20,548)
-------- --------
$242,160 $259,572
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE> 5
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------------
1995 1994
--------- ---------
(in thousands, except
per share amounts)
<S> <C> <C>
Oil and gas revenues $ 6,771 $ 9,742
Less - direct costs:
Lease operating 2,663 3,172
Production taxes 366 582
Depletion, depreciation and amortization 3,407 4,177
-------- --------
335 1,811
General and administrative expense (1,076) (1,630)
Interest expense (7,417) (6,984)
Other (318) -
-------- --------
Net loss $ (8,476) $ (6,803)
======== ========
Loss per share:
Class A Common Stock $ (.31) $ (.25)
======== ========
Class B Common Stock $ (.31) $ (.25)
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
5
<PAGE> 6
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-----------------------------------
1995 1994
--------- ---------
(in thousands, except
per share amounts)
<S> <C> <C>
Oil and gas revenues $ 23,708 $ 30,429
Less - direct costs:
Lease operating 8,775 9,304
Production taxes 1,346 1,777
Depletion, depreciation and amortization 11,138 13,187
-------- --------
2,449 6,161
General and administrative expense (4,844) (4,943)
Interest expense (21,839) (20,936)
Other 65 983
-------- --------
Net loss $(24,169) $(18,735)
======== ========
Loss per share:
Class A Common Stock $ (.89) $ (.69)
======== ========
Class B Common Stock $ (.89) $ (.69)
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
6
<PAGE> 7
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-----------------------------------
1995 1994
--------- ---------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(24,169) $(18,735)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depletion, depreciation and amortization 11,486 13,532
Amortization of debt issuance costs
included in interest expense 939 925
Other 1,118 1,484
Changes in other assets and liabilities:
Decrease in accounts receivable 7,063 4,688
Decrease (increase) in other current assets (523) 329
Payment of loan fees and costs - (238)
Decrease (increase) in other noncurrent assets (894) 130
Decrease in accounts payable (8,318) (5,563)
Increase (decrease) in accrued interest and liabilities 12,588 (1,421)
Increase (decrease) in other noncurrent liabilities 1,618 (202)
-------- --------
Net cash provided by (used in)
operating activities 908 (5,071)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (14,001) (24,272)
Proceeds from sale of oil and gas properties 14,800 21,692
-------- --------
Net cash provided by (used in)
investing activities 799 (2,580)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of bank debt 8,700 42,490
Payments of bank debt (8,287) (34,990)
Other noncurrent financing - (39)
-------- --------
Net cash provided by financing activities 413 7,461
-------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,120 (190)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 6,423 13,559
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 8,543 $ 13,369
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
7
<PAGE> 8
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
For the Three Months and Nine Months Ended September 30, 1995 and 1994
1. The accompanying financial statements are unaudited; however, management
believes all material adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation have been made. These
financial statements and notes should be read in conjunction with the
financial statements and related notes included in Presidio Oil
Company's (the "Company" or "Presidio") annual report on Form 10-K for
the year ended December 31, 1994, and the discussion of the Company's
various severance plans for its key and other employees included in Item
2 of this report.
The Company's Senior Subordinated Gas Indexed Notes, Senior Gas Indexed
Notes and Senior Secured Notes (collectively the "Notes") are guaranteed
by all significant subsidiaries of the Company (the "Guarantors").
Separate financial statements of the Guarantors are not included herein
because the Guarantors have fully, unconditionally, jointly and
severally guaranteed the Company's obligations with respect to the Notes
and the Company (which is primarily a holding company and whose
operating income is generated by its subsidiaries) has no separate
operations of its own. The operations, assets, liabilities and equity
of the subsidiaries of the Company that are not Guarantors are
inconsequential.
2. The computation of loss per share excludes the weighted average number
of unallocated shares held by the Company's Employee Stock Ownership
Plan which totaled 1,217,000 shares and 1,277,000 shares for the quarter
and nine months ended September 30, 1995, respectively, and 1,473,000
shares and 1,528,000 shares for the quarter and nine months ended
September 30, 1994, respectively.
3. Included in the Consolidated Statements of Cash Flows is $8,201,000 and
$20,814,000 of interest paid, net of amounts capitalized, during the
nine months ended September 30, 1995 and 1994, respectively. As
discussed below, due to the Company's financial condition, it has not
paid interest on its Public Debt since March 15, 1995.
4. During the nine months ended September 30, 1995, the Company realized
net proceeds of $15 million as the result of the sale of certain oil and
gas properties. The majority of such proceeds were used to fund the
Company's cash flow deficit and capital expenditures.
5. The revenues and operating cash flows of the Company declined
significantly in the first nine months of 1995, making it unlikely that
the Company will be able to continue as a going concern in its current
financial structure. Because of the Company's deteriorating financial
condition and because of its failure to satisfy certain interest payment
obligations, Events of Default have occurred under the indentures
governing the Company's Senior Gas Indexed Notes Due 2002 (the "Senior
Gas Indexed Notes"), its 11.5% Senior Secured Notes Due 2000 (the
"Senior Secured Notes"), and its 9% Convertible Subordinated Debentures
Due 2015 (the "9% Debentures") (collectively the "Public Debt").
Moreover, to cure a previously disclosed collateral deficiency, the
indenture governing the Senior Secured Notes (the "Senior Secured Note
Indenture") required the Company to offer to purchase at par
approximately $7.3 million of Senior Secured Notes prior to June 22,
1995. The Company did not make such offer during the 30-day grace
period subsequent to June 22, 1995 as provided in the Senior Secured
Note Indenture which also resulted in an Event of Default.
8
<PAGE> 9
Notes to Unaudited Consolidated Financial Statements
(Continued)
Although the Company is currently making all interest payments due on
its bank debt, the Company did not make a principal payment in the
amount of $1.2 million due on October 1, 1995, which caused an Event of
Default under the Company's bank credit agreement, as amended ("Credit
Agreement"). In addition, the Events of Default described above on the
Public Debt have caused an Event of Default under the Credit Agreement.
Therefore, the current portion of long-term debt on the Company's
September 30, 1995 balance sheet is comprised of the following which
includes all of the Public Debt and the Company's bank debt.
<TABLE>
<CAPTION>
September 30, 1995
Current Portion of
Long-Term Debt
------------------
(in thousands)
<S> <C>
Bank Debt $ 21,413
Senior Secured Notes 75,000
Gas Indexed Notes 100,000
9% Debentures 50,000
--------
Total current portion of long-term debt $246,413
========
</TABLE>
6. The Company follows the full cost method of accounting for oil and
gas producing activities whereby all costs incurred in the
acquisition, exploration and development of oil and gas properties
are capitalized. Sales of oil and gas properties are recorded as an
adjustment of capitalized costs, with no gain or loss recognized.
Capitalized costs are subject to a ceiling limitation test based on
a computed value of the Company's present value of estimated future
net revenues from proved reserves using current prices (with
consideration of price changes only to the extent provided by
contractual arrangements), discounted at 10%, after adjusting for
tax effects at the end of each period. The calculation of the
ceiling limitation also assumes that the Company will generally
continue with its historical development program; and, for the
Company to do so, it will be required to complete the Asset Sale or
Restructuring, all as discussed in Item 2 of this report.
At September 30, 1995 the Company's average gas price declined to
$1.15 per thousand cubic feet ("MCF") of gas from $1.49 per MCF of
gas at December 31, 1994. Such decrease in gas prices caused the
Company's capitalized costs to exceed its full cost ceiling
limitation by approximately $27 million on such date. The excess
capitalized costs were not charged to the Company's earnings for the
quarter ended September 30, 1995 insofar as, on November 10, 1995,
the Company's average gas price increased to $1.34 per MCF which
resulted in the Company's full cost ceiling limitation being higher
than its capitalized costs. Nonetheless, it should be recognized
that such a reduction would have been a non-cash charge to earnings
and would be excluded in the making of calculations under the
covenants contained in the Company's Credit Agreement and the
indentures relating to the Senior Gas Indexed Notes, Senior Secured
Notes and 9% Debentures.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
CURRENT FINANCIAL CONDITION AND RECENT DEVELOPMENTS
Current Financial Condition. During 1994 and the first nine months of 1995,
the financial condition and operating cash flows of the Company were materially
and adversely affected by a significant industry-wide decline in the price of
natural gas. The Company's revenues and operating cash flows thus declined
significantly during such periods, making it unlikely that the Company will be
able to continue as a going concern in its current financial structure.
Because of the Company's deteriorating financial condition and because of its
failure to satisfy certain interest payment obligations, Events of Default have
occurred under the indentures governing the Company's Senior Gas Indexed Notes
Due 2002 (the "Senior Gas Indexed Notes"), its 11.5% Senior Secured Notes Due
2000 (the "Senior Secured Notes"), and its 9% Convertible Subordinated
Debentures Due 2015 (the "9% Debentures") (collectively the "Public Debt").
Moreover, to cure a previously disclosed collateral deficiency, the indenture
governing the Senior Secured Notes (the "Senior Secured Note Indenture")
required the Company to offer to purchase at par approximately $7.3 million of
Senior Secured Notes prior to June 22, 1995. The Company did not make such
offer during the 30-day grace period subsequent to June 22, 1995 as required by
the Senior Secured Note Indenture, resulting in an Event of Default. Although
the Company is currently making all interest payments due on its bank debt,
the Company did not make a principal payment of $1.2 million due on October 1,
1995, which caused an Event of Default under the Company's bank credit
agreement, as amended ("Credit Agreement"). In addition, the Events of Default
described above on the Public Debt have caused an Event of Default under the
Credit Agreement.
In July 1995, the Company established a data room which provided potential
buyers with information as to the Company's assets. Bids have been received
from a number of companies, and the Company and its financial advisors are
currently evaluating such bids. The Company anticipates that on November 15,
1995 it will select one of the bidders with whom it will pursue negotiations
for the sale of the Company's assets (the "Asset Sale"), with most of the
proceeds being used to satisfy the outstanding indebtedness of the Company.
Although a final decision to sell the Company will depend upon the outcome of
the negotiations relating to such Asset Sale, the Company anticipates that an
Asset Sale is most likely to occur; and, accordingly, it is not currently
negotiating with the holders of its indebtedness with respect to a
restructuring of the Company's debt obligations or examining other
alternatives that may be available to alleviate its current financial
difficulties, such as a transaction wherein the Company would retain all or
most of its oil, gas and related assets (collectively the "Restructuring").
Although the Company and its financial advisors continue to work toward solving
the Company's financial difficulties, no assurance can be given that the
Company will be able to successfully conclude an Asset Sale or a Restructuring;
and, assuming that the Company is successful in respect of concluding an Asset
Sale or Restructuring, no assurance can be given as to the value of the
Company's existing debt and equity securities that may be realized by the
holders of such securities subsequent to the conclusion of such a transaction.
If the Company is unsuccessful in its current efforts to solve its financial
difficulties, it is likely that the Company will incur the adverse consequences
described below under "Ability to Service Debt".
Ability to Service Debt. Because of its current financial condition and
operating cash flow deficit, the Company believes that, except in the context
of an Asset Sale or Restructuring, it will not make further interest payments
on the Public Debt. In addition, substantially all of the Company's oil and
gas reserves are pledged to secure the Company's bank debt and the Senior
Secured Notes, with the result that the
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Company is not able to sell such assets in order to fund the above-mentioned
interest payments. The failure to make interest payments has caused an Event
of Default under the Senior Secured Note Indenture, the Senior Gas Indexed
Note Indenture and the 9% Debenture Indenture.
As a result of the Event of Default with respect to the Senior Secured Notes,
the outstanding $75 million of Senior Secured Notes could be declared to be
immediately due and payable, and the trustee under the Senior Secured Note
Indenture would be entitled to exercise various remedies, including foreclosure
of a mortgage on a substantial portion of the Company's oil and gas properties.
As a result of the Events of Default with respect to the Senior Gas Indexed
Notes and the 9% Debentures, the outstanding $100 million of Senior Gas Indexed
Notes and $50 million of 9% Debentures could be declared immediately due and
payable.
In addition, the failure to pay interest on the Public Debt has constituted an
Event of Default under the Credit Agreement and thus the Company is prohibited
from borrowing additional funds thereunder. This Event of Default also could
lead to the $21.4 million outstanding under the Credit Agreement at November
10, 1995 being declared immediately due and payable, and the subsequent
foreclosure of a mortgage on substantially all of the Company's oil and gas
properties not pledged to secure the Senior Secured Notes. In addition to the
principal payment in the amount of $1.2 million that was due on October 1, 1995
(which the Company did not pay), scheduled quarterly commitment reductions of
$1.4 million begin January 1, 1996 and continue through July 1, 1999.
Finally, any of the Events of Default described herein could provide the
opportunity for creditors of the Company to initiate proceedings against the
Company under the United States Bankruptcy Code ("Code"). In addition, it may
be necessary to implement any Asset Sale or Restructuring through a proceeding
under the Code.
Collateral Value Requirement for the Senior Secured Notes. The Senior Secured
Notes are secured by a lien on certain proved oil and gas reserves (the
"Pledged Assets") pursuant to a pledged assets agency agreement (the "Pledged
Assets Agency Agreement"). The Pledged Assets Agency Agreement requires that,
as of various dates, the Security Value (as defined below) of the Pledged
Assets and the Security Value of the Pledged Assets that are proved developed
producing reserves (the "Pledged Producing Assets") must be equal to or greater
than certain specified percentages of the then outstanding amount of Senior
Secured Notes. For the purposes of this discussion, "Security Value" means the
aggregate present value (computed at a discount rate equal to 10% per annum) of
the future net revenues of proved oil and gas reserves, calculated in
accordance with the rules of the Securities and Exchange Commission.
On March 23, 1995, the Company calculated the Security Values of the Pledged
Assets and the Pledged Producing Assets as of the preceding December 31.
Because of the severe decline in gas prices during the second half of 1994, the
Security Values of both the Pledged Assets and the Pledged Producing Assets as
of December 31, 1994 were less than the required percentages, resulting in
deficiencies (the "Deficiencies") in respect of Pledged Assets and Pledged
Producing Assets of $4 million and $7.3 million, respectively.
The Company did not comply with the requirements in respect of curing the
Deficiencies by the dates set forth for such compliance; and, as a result, an
Event of Default under the Senior Secured Note Indenture has occurred and the
trustee under such indenture and the holders of Senior Secured Notes
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
have the remedies described above in respect of an Event of Default under the
Senior Secured Note Indenture. See "Ability to Service Debt" above.
Ability to Replace Reserves Produced and Maintain Production Levels. The
ability of the Company to maintain and/or increase its current level of oil and
gas production and to find and develop new proved reserves of oil and gas to
replace the reserves being produced in 1995 depends on the availability of
funds for capital expenditures. Due to the Company's current financial
condition and operating cash flow deficit, the Company has limited funds
available for drilling operations during 1995 (See "Capital
Expenditures/Property Sales" below). The Company's production and volumes of
proved oil and gas reserves are likely to continue to decline during the
remainder of 1995. Such a decline in production would increase the Company's
operating cash flow deficit, and a decline in reserve volumes could cause
further Deficiencies under the collateral requirement relating to the Senior
Secured Notes. See "Collateral Value Requirement for the Senior Secured Notes"
above.
CAPITAL EXPENDITURES/PROPERTY SALES
During the nine months ended September 30, 1995, the Company realized net cash
proceeds of $15 million as the result of the sale of certain oil and gas
properties. The majority of such proceeds were used to fund the Company's cash
flow deficit and capital expenditures during such periods.
The Company's capital expenditures for its oil and gas operations totaled
approximately $14.0 million during the nine months ended September 30, 1995, of
which $7.5 million was used in development and recompletion activities, $3.4
million was used in exploratory activities, and $3.1 million was used in various
other activities, including acquisitions of producing properties and undeveloped
acreage. The Company funded its capital expenditures during such period with
the proceeds of asset sales and with available cash due to the discontinuance of
interest payments on the Public Debt. Due to the current uncertainty as to its
financial condition and future trends in gas pricing, the Company has determined
to limit its capital expenditures, subject to the availability of funds (as to
which no assurance can be given), during the remainder of 1995 to those that are
required to maintain its producing oil and gas properties as well as certain
essential development and other drilling operations. Except for a requirement
under the Credit Agreement that the Company spend $5 million per year on the
Mortgaged Properties during the three-year period ending October 1, 1996, the
timing of most of the Company's capital expenditures is discretionary and there
are currently no material long-term commitments associated with the Company's
capital expenditure plans. The unavailability of funds for capital projects
could also materially and adversely impact the value of the Company's interest
in properties it owns jointly with others. Pursuant to the operating agreements
governing these joint ownership relationships, the Company could be forced to
contribute funds for capital projects in respect to these properties or suffer
"non-consent" penalties. Such penalties could materially and adversely affect
the value of the Company's ownership interest in any such properties.
RESULTS OF OPERATIONS
The Company had a net loss of $8,476,000 and $24,169,000 for the quarter and
nine months ended September 30, 1995, respectively, compared to a net loss of
$6,803,000 and $18,735,000 for the quarter and nine months ended September 30,
1994, respectively. The increased losses during 1995 are due primarily to a
decrease in the Company's revenues and cash flows during the 1995 periods as
compared to the 1994
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
periods. Such decreases are a result of lower gas prices and lower oil and gas
production and, for the three month period, lower oil prices. The decrease in
oil and gas production during the 1995 periods as compared to the 1994 periods
is the result of property sales during 1994 and 1995 and normal production
declines on the Company's properties, offset to some extent by increased
production resulting from the Company's 1995 capital expenditures.
The following table reflects the average prices received by the Company for oil
and gas and the amount of its oil and gas production for the three months and
nine months ended September 30, 1995 and 1994:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ --------------------------
1995 1994 1995 1994
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Average Price:
Oil and condensate (per barrel) $14.57 $15.34 $15.36 $13.58
Gas (per thousand cubic feet) $1.09 $1.35 $1.18 $1.48
Production:
Oil and condensate (barrels) 207,000 270,000 661,000 863,000
Gas (thousand cubic feet) 3,429,000 4,160,000 11,531,000 12,668,000
Equivalent barrel (1) 779,000 963,000 2,583,000 2,974,000
</TABLE>
(1) Oil and gas are converted to a common unit of measure on the basis of
six MCF of gas to one barrel of oil.
The reduced amount of depletion, depreciation and amortization during the 1995
periods as compared to the 1994 periods is primarily due to a decrease in
production (on an equivalent barrel basis). Lease operating expenses have
increased on a unit of production basis for the 1995 periods as compared to the
1994 periods due to the production decline on the Company's properties and the
sale of certain low operating cost properties. However, the lease operating
expenses for the 1995 third quarter are approximately equal to those during the
1994 third quarter due to a lower level of workover expense during the 1995
period.
The following table shows the costs associated with the Company's oil and gas
revenues per equivalent barrel of oil for the three months and nine months
ended September 30, 1995 and 1994:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ --------------------------
1995 1994 1995 1994
--------- --------- ---------- ----------
(per equivalent barrel)
<S> <C> <C> <C> <C>
Production Costs $3.89 $3.90 $3.92 $3.73
Depletion, Depreciation and
Amortization $4.37 $4.34 $4.31 $4.43
</TABLE>
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company has significantly reduced general and administrative expenses for
the quarter ended September 30, 1995 as compared to the quarter ended September
30, 1994 due to the reduction in personnel that occurred during the quarter
ended June 30, 1995. The general and administrative expenses for the nine
months ended September 30, 1995 include a charge during the quarter ended June
30, 1995 of $900,000 relating to severance costs incurred in connection with
such reduction in personnel pursuant to the Company's severance plans.
Further severance costs may occur in future periods in respect of a reduction
in the Company's personnel from a further downsizing or an Asset Sale, as a
result of payments made under the Company's severance plans for its key and
other employees. One severance plan generally provides for a payment equal to
one-twelfth of the employee's annual base salary multiplied by the number of
years of continuous service with the Company plus two months' salary, and the
other severance plan generally provides for a payment equal to an employee's
annual base salary (including the Company's benefit plan contribution to such
employee for such year), as adjusted in the case of certain key employees by an
additional seven to eight months' salary and for certain other factors. Health
and medical payments are also provided under both plans for severed employees
for a period of at least six months.
The Company's interest expense has increased during the quarter and nine months
ended September 30, 1995 as compared to the comparable periods in 1994 as a
result of the 1995 periods having higher average levels of bank debt
outstanding and due to penalty interest accrued on the unpaid balance of
interest due on the Public Debt.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Indemnification Agreement, dated as of June 20, 1995,
together with a schedule identifying specific
agreements between the Company and each of the Company's
directors and Named Officers.
10.2 The Company's Severance Benefit Plan effective as of
July 1, 1995.
10.3 Key Employee Severance Agreement, dated as of July 25,
1995, together with a schedule identifying specific
agreements between the Company and Key Employees and
setting forth the material details in which those
agreements differ from the Key Employee Severance
Agreement filed.
10.4 Amendment to Key Employee Severance Agreements, dated
August 16, 1995 and effective as of July 25, 1995.
10.5 Amendments to Supplemental Executive Retirement
Agreement, dated October 26, 1995.
27 Financial Data Schedule
(b) Reports on Form 8-K
On September 13, 1995, a Form 8-K was filed dated September 13,
1995, which reports under Item 5 "Other Events" the interest
rate on the Company's Senior Subordinated Gas Indexed Notes Due
1999 and Senior Gas Indexed Notes Due 2002 to be 13.250% for
the period November 15, 1995 to February 14, 1996.
On September 21, 1995, a Form 8-K was filed dated September 15,
1995, which reports under Item 5 "Other Events" that the
Company did not pay the $2.25 million of interest that became
due on that date on its 9% Convertible Subordinated Debentures
Due 2015 (the "9% Debentures") which resulted in a Default
under the indenture (the "9% Debenture Indenture") governing
the 9% Debentures.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PRESIDIO OIL COMPANY
-----------------------------------
Registrant
DATE: November 14, 1995 /s/ Robert L. Smith
----------------- -----------------------------------
Robert L. Smith
President and
Chief Operating Officer
DATE: November 14, 1995 /s/ Charles E. Brammeier
----------------- -----------------------------------
Charles E. Brammeier
Controller
(Principal Accounting Officer)
16
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.1 Indemnification Agreement, dated as of June 20, 1995, together with a schedule identifying specific agreements
between the Company and each of the Company's directors and Named Officers.
10.2 The Company's Severance Benefit Plan effective as of July 1, 1995.
10.3 Key Employee Severance Agreement, dated as of July 25, 1995, together with a schedule identifying specific
agreements between the Company and Key Employees and setting forth the material details in which those agreements
differ from the Key Employee Severance Agreement filed.
10.4 Amendment to Key Employee Severance Agreements, dated August 16, 1995 and effective as of July 25, 1995.
10.5 Amendments to Supplemental Executive Retirement Agreement, dated October 26, 1995.
27 Financial Data Schedule (Submitted to the SEC for its information).
</TABLE>
<PAGE> 1
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of the 20th
day of June, 1995, by and between Presidio Oil Company, a Delaware corporation
(the "Company"), and George P. Giard, Jr. (the "Indemnitee").
RECITALS
A. The Indemnitee is presently serving as a director and/or an
officer of the Company and/or, at the request of the Company, in an Authorized
Capacity (as defined below) of or for Another Entity (as defined below). The
Company desires the Indemnitee to continue in such capacity. The Company
believes that the Indemnitee's undertaking of such additional responsibilities
is important to the Company and that the protection afforded by this Agreement
will enhance the Indemnitee's ability to discharge such responsibilities under
existing circumstances. The Indemnitee is willing, subject to certain
conditions including without limitation the execution and performance of this
Agreement by the Company and the Company's agreement to provide the Indemnitee
at all times the broadest and most favorable (to Indemnitee) possible
indemnification permitted by applicable law (whether by legislative action or
judicial decision), to continue in that capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under the By-Laws of the Company, as amended (the "By-Laws"), the
Company may obtain (and if obtained, will use reasonable best efforts to keep
in force, at its sole expense) insurance protecting its officers and directors
and certain other persons (including the Indemnitee) against certain losses
arising out of actual or threatened actions, suits or proceedings to which such
persons may be made or threatened to be made parties. The Company may,
however, decide not or be unable to obtain such insurance, and, if obtained,
there can be no assurance as to the continuation or renewal thereof, or that
any such insurance will provide coverage for losses to which the Indemnitee may
be exposed and for which he or she may be permitted to be indemnified under the
General Corporation Law of the State of Delaware (the "DGCL").
Now, Therefore, For and in consideration of the premises, the mutual
promises hereinafter set forth, the reliance of the Indemnitee hereon in
continuing to serve the Company or Another Entity in his or her present
capacity and in undertaking to serve the Company or Another Entity in any
additional capacity or capacities, the Company and the Indemnitee agree as
follows:
1. Continued Service. The Indemnitee will continue to
serve as a director and/or an officer of the Company and/or in each such
Authorized Capacity of or for Another Entity in which he or she presently
serves, in each case so long as he or she is duly elected and qualified to
serve in such capacity or until he or she resigns or is removed.
<PAGE> 2
2. Initial Indemnity. (a) The Company will indemnify
the Indemnitee when he or she was or is involved in any manner (including
without limitation as a party, a deponent or a witness) or is threatened to be
made so involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, formal or
informal, and any appeals therefrom (a "Proceeding") (other than a Proceeding
by or in the right of the Company), by reason of the fact that he or she is or
was or had agreed to become a director (including service as a member of any
committee of directors), officer, employee or agent of the Company, or is or
was serving or had agreed to serve at the request of the Company as a director
(including service as a member of any committee of directors), officer,
partner, member, trustee, employee or agent (each an "Authorized Capacity") of
another corporation, partnership, joint venture, trust or other enterprise
(each "Another Entity"), or by reason of any action alleged to have been taken
or omitted in such capacity, against any and all costs, charges and expenses
(including attorneys' and others' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such Proceeding if the Indemnitee acted in good faith and in a manner that he
or she reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal Proceeding, the Indemnitee had no
reasonable cause to believe his or her conduct was unlawful. The termination
of any Proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent will not, of itself, adversely affect the
right of the Indemnitee to indemnification or create a presumption that the
Indemnitee did not meet the foregoing standard of conduct to the extent
applicable thereto.
(b) The Company will indemnify the Indemnitee
when he or she was or is a party or is threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment in its favor
by reason of the fact that he or she is or was or had agreed to become a
director, officer, employee or agent of the Company, or is or was serving or
had agreed to serve at the request of the Company in an Authorized Capacity of
or for Another Entity, against any and all costs, charges and expenses
(including attorneys' and others' fees) actually and reasonably incurred by him
or her in connection with the investigation, preparation, defense, settlement
or appeal of such Proceeding if the Indemnitee acted in good faith and in a
manner that he or she reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification will be made in
respect of any claim, issue or matter as to which the Indemnitee shall have
been adjudged to be liable to the Company unless, and only to the extent, that
the Court of Chancery or the court in which the Proceeding was brought
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court deems proper.
(c) To the extent that the Indemnitee has been
successful on the merits or otherwise, including without limitation the
dismissal of a Proceeding without prejudice, in the defense of any Proceeding
referred to in Section 2(a) or Section 2(b) or in the defense of any claim,
issue or matter in any such Proceeding, the Company will indemnify him or her
against any and all costs, charges and expenses, including without
-2-
<PAGE> 3
limitation attorneys' and others' fees, actually and reasonably incurred by him
or her in connection therewith.
(d) Any indemnification under Section 2(a) or
Section 2(b) (unless ordered by a court) will be made by the Company only as
authorized in the specific case upon a determination, in accordance with
Section 4, that such indemnification is proper in the circumstances because he
or she has met the applicable standards of conduct set forth in Section 2(a)
and Section 2(b) (the "Indemnification Standards"). Such determination will be
made in the manner set forth in Section 4(b).
(e) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in defending any Proceeding will be paid
by the Company as incurred and in advance of the final disposition of such
Proceeding in accordance with the procedure set forth in Section 4(e).
(f) Notwithstanding anything in this Agreement to
the contrary, the Indemnitee will not be entitled to indemnification or
advancement of expenses pursuant hereto in connection with any Proceeding
initiated by the Indemnitee against the Company (except for any Proceeding
initiated by the Indemnitee pursuant to Section 6) unless the Company has
joined in or consented to the initiation of such Proceeding.
3. Additional Indemnification. (a) Pursuant to Section
145(f) of the DGCL, without limiting any right which the Indemnitee may have
under Section 2, the By-Laws, the DGCL, any policy of insurance or otherwise,
but subject to the limitations set forth in Section 2(f) and to any maximum
permissible indemnity which may exist under applicable law at the time of any
request for indemnity hereunder as contemplated by this Section 3(a), the
Company will indemnify the Indemnitee against any amount which he or she is or
becomes legally obligated to pay relating to or arising out of any claim made
against him or her because of any act, failure to act or neglect or breach of
duty, including any actual or alleged error, omission, misstatement or
misleading statement, which he or she commits, suffers, permits or acquiesces
in while acting in his or her capacity as a director or officer of the Company,
or, at the request of the Company, in an Authorized Capacity of or for Another
Entity. The payments which the Company is obligated to make pursuant to this
Section 3 will include without limitation damages, judgments, fines, amounts
paid in settlement and reasonable charges, costs and expenses, including
expenses of investigation, preparation, defense and settlement of Proceedings
and expenses of appeal, attachment or similar bonds; provided, however, that
the Company will not be obligated under this Section 3(a) to make any payment
in connection with any claim against the Indemnitee:
(i) to the extent of any fine or similar
governmental imposition which the Company is prohibited by
applicable law from paying and which results from a final, non
appealable order; or
-3-
<PAGE> 4
(ii) to the extent based upon or attributable to
the Indemnitee gaining in fact a personal profit to which he
or she was not legally entitled, including without limitation
profits made from the purchase and sale of equity securities
of the Company which are recoverable by the Company pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and profits arising from
transactions in securities which were effected in violation of
Section 10(b) or Section 14(e) of the Exchange Act, including
Rule 10b-5 or Rule 14e-3 promulgated thereunder.
The determination of whether the Indemnitee is entitled to indemnification
under this Section 3(a) shall be made in accordance with Section 4(b).
(b) Any and all costs, charges and expenses,
including without limitation attorneys' and others' fees, actually and
reasonably incurred by the Indemnitee in connection with any claim for which
the Indemnitee may be entitled to indemnification pursuant to Section 3(a) will
be paid by the Company as incurred and in advance of the final disposition
thereof in accordance with the procedure set forth in Section 4(e).
4. Certain Procedures Relating to Indemnification and
Advancement of Expenses. (a) Except as otherwise permitted or required by the
DGCL, for purposes of pursuing his or her rights to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, the Indemnitee
may, but shall not be required to, submit to the Company (to the attention of
the Secretary) a statement of request for indemnification substantially in the
form of Exhibit 1 attached hereto (the "Indemnification Statement") stating
that he or she believes that he or she is entitled to indemnification pursuant
to this Agreement, together with such documents supporting the request as are
reasonably available to the Indemnitee and are reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification hereunder (the "Supporting Documentation"). Upon receipt of
any Indemnification Statement, the Company will promptly advise the Board of
Directors of the Company (the "Board") in writing that the Indemnitee has
requested indemnification.
(b) The Indemnitee's entitlement to
indemnification under Section 2(a), Section 2(b) or Section 3(a), as the case
may be, will be determined promptly following a claim by the Indemnitee for
indemnification thereunder and in any event (if the Indemnitee submits to the
Company an Indemnification Statement and Supporting Documentation) not less
than 30 calendar days after receipt by the Company of such Indemnification
Statement and Supporting Documentation. The Indemnitee's entitlement to
indemnification under Section 2(a) or Section 2(b) will, subject to the next
sentence, be made in one of the following ways: (i) by the Board by a majority
vote of the directors who are not and were not parties to such Proceeding or
claim ("Disinterested Directors"), even though less than a quorum, (ii) if
there are no Disinterested Directors, or if a majority of the Disinterested
Directors so direct, by written opinion of independent legal counsel selected
by a majority of the Disinterested Directors (or, if there are no Disinterested
Directors or a majority vote thereof is not obtainable, by a majority of the
entire Board), if a quorum of the Board consisting of Disinterested Directors
is not obtainable or, even
-4-
<PAGE> 5
if obtainable, a quorum of Disinterested Directors so directs, (iii) by the
stockholders of the Company (but only if a majority of Disinterested Directors,
if they constitute a quorum of the Board, presents the issue of entitlement to
indemnification to the stockholders of the Company for their determination) or
(iv) as deemed to have been determined in accordance with Section 4(c). The
Indemnitee's entitlement to indemnification under Section 3(a) or, in the event
of a Change of Control (as hereinafter defined), under Section 2(a) or Section
2(b) will be determined by written opinion of independent legal counsel
selected by the Indemnitee. Independent legal counsel selected as described
above will be a law firm or member of a law firm (x) that neither at the time
in question nor in the five years immediately preceding such time has been
retained to represent (A) the Company (or any of its affiliates) or the
Indemnitee in any matter material to either such party or (B) any other party
to the Proceeding or claim giving rise to a claim for indemnification under
this Agreement, (y) that, under the applicable standards of professional
conduct then prevailing under the law of the State of Delaware, would not be
precluded from representing either the Company or the Indemnitee in an action
to determine the Indemnitee's rights under this Agreement and (z) to which the
Indemnitee or the Company, acting therein through a majority of the
Disinterested Directors or, if there are no Disinterested Directors, by a
majority of the entire Board, does not reasonably object. If such independent
legal counsel is reasonably objected to by the Indemnitee or the Company, the
Indemnitee shall select another independent legal counsel subject to similar
reasonable objection until independent legal counsel is agreed upon. The
Company will pay the fees and expenses of such independent legal counsel.
(c) Submission of an Indemnification Statement
and Supporting Documentation to the Company pursuant to Section 4(b) will
create a presumption that the Indemnitee is entitled to indemnification under
Section 2(a), Section 2(b) or Section 3(a), as the case may be, and thereafter
the Company will have the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if the person or persons
empowered under Section 4(b) to determine the Indemnitee's entitlement to
indemnification have not been appointed or have not made a determination within
30 calendar days after receipt by the Company of such Indemnification Statement
and Supporting Documentation, the Indemnitee will be deemed to be entitled to
indemnification unless within such 30-calendar day period the person or persons
empowered under Section 4(b) to determine entitlement to indemnification have
made a determination, based upon clear and convincing evidence (sufficient to
rebut the foregoing presumption), that the Indemnitee is not entitled to such
indemnification and the Indemnitee has received notice within such period in
writing of such determination, which notice will (i) disclose with
particularity the evidence in support of such determination and (ii) (A) if
made by Disinterested Directors, be sworn to by all Disinterested Directors who
participated in the determination and voted to deny indemnification, (B) if
made by independent legal counsel, include a copy of the related written
opinion of such counsel or (C) if made by the stockholders of the Company,
include a certificate of the Company's Secretary as to the vote of such
stockholders. The provisions of this Section 4(c) are intended to be
procedural only and will not affect the right of the Indemnitee to
indemnification under this Agreement and any determination that the Indemnitee
is not entitled to indemnification and any failure to
-5-
<PAGE> 6
make the payments requested in the Indemnification Statement will be subject to
review as provided in Section 6.
(d) If a determination is made or deemed to have
been made pursuant to this Section 4 that the Indemnitee is entitled to
indemnification, the Company will pay to the Indemnitee the amounts to which
the Indemnitee is entitled within five business days after such determination
of entitlement to indemnification has been made or deemed to have been made.
(e) In order to obtain advancement of expenses
pursuant to Section 2(e), the Indemnitee will submit to the Company a written
undertaking substantially in the form of Exhibit 2 attached hereto, executed
personally or on his or her behalf (the "Undertaking"), stating that (i) he or
she has incurred or will incur actual expenses in defending a Proceeding and
(ii), if and to the extent required by law at the time of such advance, he or
she undertakes to repay such amounts advanced as to which it may ultimately be
determined that the Indemnitee is not entitled. In order to obtain advancement
of expenses pursuant to Section 3(b), the Indemnitee may submit an Undertaking
or, if the Indemnitee chooses not to submit an Undertaking, shall submit such
other form of request as he or she determines to be appropriate (an "Expense
Request"). Upon receipt of an Undertaking or Expense Request, as the case may
be, the Company will within 5 calendar days make payment of the costs, charges
and expenses stated in the Undertaking or Expense Request. No security will be
required in connection with any Undertaking or Expense Request and any
Undertaking or Expense Request will be accepted, and all such payments shall be
made, without reference to the Indemnitee's ability to make repayment.
5. Duplication of Payments. The Company will not be
liable under this Agreement to make any payment in connection with any claim
made against the Indemnitee to the extent the Indemnitee has actually received
payment (under any insurance policy, the By-Laws, the DGCL or otherwise) of the
amount otherwise payable hereunder.
6. Enforcement. (a) If a claim for indemnification or
advancement of expenses made to the Company pursuant to Section 4 is not timely
paid in full by the Company as required by Section 4, the Indemnitee will be
entitled to seek judicial enforcement of the Company's obligations to make such
payments. If a determination is made pursuant to Section 4 that the Indemnitee
is not entitled to indemnification or advancement of expenses hereunder, (i)
the Indemnitee may at any time thereafter seek an adjudication of his or her
entitlement to such indemnification or advancement either, at the Indemnitee's
sole option, in (A) an appropriate court of the State of Delaware or any other
court of competent jurisdiction or (B) an arbitration to be conducted by a
single arbitrator pursuant to the rules of the American Arbitration
Association, (ii) any such judicial proceeding or arbitration will be de novo
and the Indemnitee will not be prejudiced by reason of such adverse
determination, and (iii) in any such judicial proceeding or arbitration the
Company will have the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Agreement.
-6-
<PAGE> 7
(b) The Company will be precluded from asserting
in any judicial proceeding or arbitration commenced pursuant to the provisions
of Section 6(a) that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and will stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
(c) In any action brought under Section 6(a), it
will be a defense to a claim for indemnification pursuant to Section 2(a) or
Section 2(b) (but not an action brought to enforce a claim for costs, charges
and expenses incurred in defending any Proceeding in advance of its final
disposition where the Undertaking, if any is required, has been tendered to the
Company) that the Indemnitee has not met the standards of conduct which make it
permissible under the DGCL for the Company to indemnify the Indemnitee for the
amount claimed, but the burden of proving such defense will be on the Company.
Neither the failure of the Company (including any person or persons empowered
under Section 4(b) to determine the Indemnitee's entitlement to
indemnification) to have made a determination prior to commencement of such
action that indemnification of the Indemnitee is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
DGCL nor an actual determination by the Company (including any person or
persons empowered under Section 4(b) to determine the Indemnitee's entitlement
to indemnification) that the Indemnitee has not met such applicable standard of
conduct will be a defense to the action or create a presumption that the
Indemnitee has not met the applicable standard of conduct.
(d) It is the intent of the Company that the
Indemnitee not be required to incur the expenses associated with the
enforcement of his or her rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to the Indemnitee hereunder.
Accordingly, if it should appear to the Indemnitee that the Company has failed
to comply with any of its obligations under this Agreement, or if the Company
or any other person takes any action to declare this Agreement void or
unenforceable or institutes any action, suit or proceeding designed (or having
the effect of being designed) to deny, or to recover from, the Indemnitee the
benefits intended to be provided to the Indemnitee hereunder, the Company
irrevocably authorizes the Indemnitee from time to time to retain counsel of
his or her choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction relating to enforcement of this Agreement. Notwithstanding
any existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Indemnitee's entering into an
attorney-client relationship with such counsel, and in that connection the
Company and the Indemnitee acknowledge that a confidential relationship will
exist between the Indemnitee and such counsel. Regardless of the outcome
thereof, the Company will pay and be solely responsible for any and all costs,
charges and expenses, including without limitation attorneys' and others' fees,
incurred by the Indemnitee (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of
-7-
<PAGE> 8
the Company or any person contesting the validity or enforceability of this
Agreement or any provision hereof as aforesaid.
7. Liability Insurance and Funding. To the extent the
Company maintains an insurance policy or policies providing directors' and
officers' liability insurance, the Indemnitee will be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for a director or officer of the Company or a person serving
at the request of the Company in an Authorized Capacity of or for Another
Entity, as the case may be. The Company may, but shall not be required to,
create a trust fund, grant a security interest or use other means (including
without limitation a letter of credit) to ensure the payment of such amounts as
may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.
8. Change of Control. (a) If the Company sells or
otherwise disposes of all or substantially all of its assets or is a
constituent corporation in a consolidation, merger or other business
combination transaction or if there is a change of control (as defined below)
of the Company, (a) the Company will require (if it is not the surviving,
resulting or acquiring corporation therein) the surviving, resulting or
acquiring corporation expressly to assume the Company's obligations under this
Agreement and to agree to indemnify the Indemnitee to the full extent provided
herein and (b), whether or not the Company is the resulting, surviving or
acquiring corporation in any such transaction (or Change of Control), the
Indemnitee will also stand in the same position under this Agreement with
respect to the resulting, surviving or acquiring corporation as he or she would
have with respect to the Company if the transaction (or Change of Control) had
not occurred.
(b) The Company agrees that if there is a Change of
Control of the Company (other than a Change of Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change of Control) then with respect to all matters
thereafter arising concerning the rights of the Indemnitee to indemnity
payments and advancement of expenses under this Agreement or any other
agreement or provisions of the Certificate of Incorporation of the Company (the
"Certificate") or the By-laws now or hereafter in effect, the Company shall
seek legal advice only from independent legal counsel selected as provided in
Section 4(b). Such counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee would be permitted to be indemnified under applicable law. The
Company agrees to pay the reasonable fees of such independent legal counsel and
to fully indemnify such counsel against any and all expenses (including
attorneys' fees), claims, liabilities and damages arising out of or relating to
this Agreement or its engagement pursuant hereto.
9. Partial Indemnity. If the Indemnitee is entitled
under any provision of this Agreement to indemnification by the Company for
some or a portion of the costs, charges, expenses, judgments, fines and amounts
paid in settlement of a Proceeding but not, however, for the total amount
thereof, the Company shall nevertheless indemnify the Indemnitee for the
portion thereof to which the Indemnitee is entitled.
-8-
<PAGE> 9
10. Nonexclusivity and Severability. (a) The right to
indemnification and advancement of expenses provided by this Agreement is not
exclusive of any other right to which the Indemnitee may be entitled under the
Certificate, the By-Laws, the DGCL, any other statute, insurance policy,
agreement, vote of stockholders or of directors or otherwise, both as to
actions in his or her official capacity and as to actions in another capacity
while holding such office, and will continue after the Indemnitee has ceased to
serve as a director or officer of the Company or in an Authorized Capacity in
or for Another Entity and will inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, to the extent the
Indemnitee otherwise would have any greater right to indemnification or
advancement of expenses under any provision of the Certificate or the By-Laws
as in effect on the date hereof, the Indemnitee will be deemed to have such
greater right pursuant to this Agreement; and, provided further, that, inasmuch
as it is the intention of the Company to provide the Indemnitee with the
broadest and most favorable (to the Indemnitee) possible indemnity permitted by
applicable law (whether by legislative action or judicial decision), to the
extent that the DGCL currently permits or in the future permits (whether by
legislative action or judicial decision) any greater right to indemnification
or advancement of expenses than that provided under this Agreement as of the
date hereof, the Indemnitee will automatically, without the necessity of any
further action by the Company or the Indemnitee, be deemed to have such greater
right pursuant to this Agreement. Similarly, the Indemnitee shall have the
benefit of any future changes to the By-Laws or the Certificate which grant or
permit any greater right to indemnification or advancement of expenses.
(b) The Company will not adopt any amendment to
the Certificate or By-Laws the effect of which would be to deny, diminish or
encumber the Indemnitee's rights to indemnity pursuant to the Certificate, the
By-Laws, the DGCL or any other applicable law as applied to any act or failure
to act occurring in whole or in part prior to the date upon which any such
amendment was approved by the Board or the stockholders, as the case may be.
Notwithstanding the foregoing, if the Company adopts any amendment to the
Certificate or By-Laws the effect of which is to so deny, diminish or encumber
the Indemnitee's rights to such indemnity, such amendment will apply only to
acts or failures to act occurring entirely after the effective date thereof.
(c) If any provision or provisions of this
Agreement are held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation all portions of any
paragraph of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) will not in any way be affected or impaired thereby and (ii), to
the fullest extent possible, the provisions of this Agreement (including
without limitation all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) will be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable. No claim or right to indemnity or advancement of expenses
pursuant to Section 3 hereof shall in any way affect or limit any right which
the Indemnitee may have under Section 2 hereof, the Certificate, the By-Laws,
the DGCL, any policy of insurance or otherwise.
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<PAGE> 10
11. Governing Law. This Agreement will be governed by
and construed in accordance with the laws of the State of Delaware, without
giving effect to the principles of conflict of laws thereof.
12. Modification; Survival. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof;
provided, however, that this provision shall not be construed to affect the
Company's obligations to the Indemnitee under the Certificate or By-Laws. This
Agreement may be modified only by an instrument in writing signed by both
parties hereto. The provisions of this Agreement will survive the death,
disability, or incapacity of the Indemnitee or the termination of the
Indemnitee's service as a director or an officer of the Company or in an
Authorized Capacity of or for Another Entity and will inure to the benefit of
the Indemnitee's heirs, executors and administrators.
13. Certain Terms. (a) For purposes of this Agreement,
references to a person's capacity as a "director" shall include without
limitation such person's capacity as a member of any committee appointed by the
board of which such person is a director; references to "Another Entity" will
include employee benefit plans; references to "fines" will include any excise
taxes assessed on the Indemnitee with respect to any employee benefit plan; and
references to "serving at the request of the Company" will include any service
in any capacity which imposes duties on, or involves services by, the
Indemnitee with respect to an employee benefit plan, its participants or
beneficiaries; references to Sections or Exhibits are to Sections or Exhibits
of or to this Agreement; references to the singular will include the plural and
vice versa; and if the Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan he or she will be deemed to have acted in a "manner
not opposed to the best interests of the Company" as referred to herein.
(b) For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred if (1) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company or a corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportions as their ownership of stock
of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the total voting power represented by the Company's
then outstanding Voting Securities, (2) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new director whose election by the Board of
Directors or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (3) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total
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<PAGE> 11
voting power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in one
transaction or a series of transactions) all or substantially all the Company's
assets.
(c) For purposes of this Agreement, the term "Voting
Securities"shall mean any securities of the Company which vote generally in the
election of directors.
14. Joint Defense. Notwithstanding anything to the
contrary contained herein, if (a) the Indemnitee elects to retain counsel in
connection with any Proceeding or claim in respect of which indemnification may
be sought by the Indemnitee against the Company pursuant to this Agreement and
(b) any other director or officer of the Company or person serving at the
request of the Company in an Authorized Capacity of or for Another Entity may
also be subject to liability arising out of such Proceeding or claim and in
connection with such Proceeding or claim seeks indemnification against the
Company pursuant to an agreement similar to this Agreement, the Indemnitee,
together with such other persons, will employ counsel to represent jointly the
Indemnitee and such other persons unless the Indemnitee determines that such
joint representation would be precluded under the applicable standards of
professional conduct then prevailing under the law of the State of Delaware, in
which case the Indemnitee will notify the Company (to the attention of the
Secretary) thereof and will be entitled to be represented by separate counsel.
15. EXPRESS NEGLIGENCE ACKNOWLEDGEMENT. WITHOUT LIMITING
OR ENLARGING THE SCOPE OF THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS
AGREEMENT, THE INDEMNITEE WILL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN
ACCORDANCE WITH THE TERMS HEREOF, REGARDLESS OF WHETHER THE CLAIM GIVING RISE
TO SUCH INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY, OF THE INDEMNITEE.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
PRESIDIO OIL COMPANY
By: /s/ Robert L. Smith
----------------------
Robert L. Smith
President
INDEMNITEE
/s/ George P. Giard, Jr.
-------------------------
George P. Giard, Jr.
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<PAGE> 12
Exhibit 1
INDEMNIFICATION STATEMENT
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of ____________, 199__ (the
"Indemnification Agreement"), between Presidio Oil Company, a Delaware
corporation (the Company"), and the undersigned.
2. I am requesting indemnification in connection with a
Proceeding (as defined in the Indemnification Agreement) or claim in which I
was or am involved or am threatened to be made involved.
3. With respect to all matters related to any such Proceeding or
claim, I believe that I am entitled to be indemnified pursuant to the
provisions of the Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I
am requesting indemnification against liabilities which have or may arise out
of _____________________________________________________________________________
________________________________________________________________________________
____________.
5. I have attached such documents supporting this request as are
reasonably available to me and are reasonably necessary to determine whether
and to what extent I am entitled to indemnification under the Indemnification
Agreement.
-----------------------------------
Name:
-----------------------------
<PAGE> 13
Exhibit 2
UNDERTAKING
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of __________, 199_ (the "Indemnification Agreement"),
between Presidio Oil Company, a Delaware corporation (the "Company"), and the
undersigned.
2. I am requesting advancement of certain costs, charges and
expenses (including attorneys' and others' fees) which I have incurred or will
incur in defending a Proceeding (as defined in the Indemnification Agreement)
or in connection with a claim for which I may be entitled to indemnification
pursuant to the Indemnification Agreement.
3. I hereby undertake to repay this advancement of expenses if it
is ultimately determined that I am not entitled to be indemnified by the
Company under the Indemnification Agreement.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to ____________________________
_______________________________________________________________________________
____________________.
-----------------------------------
Name:
-----------------------------
<PAGE> 14
PRESIDIO OIL COMPANY
SCHEDULE OF INDEMNIFICATION AGREEMENTS
William D. Benjes, Jr.
George P. Giard, Jr.
Peter H. Havens
John W. Hyland, Jr.
Raymond J. Kosi
J. Howard Marshall, II
Hugh A. L. Mumford
Peter Silvester
Robert L. Smith
Christopher S. Hardesty
Bruce R. DeBoer
Charles E. Brammeier
Judson Williams
Stephen A. Lieberman
Bradley M. Colby
Thomas A. Mazza
Gary E. Houghton
<PAGE> 1
EXHIBIT 10.2
PRESIDIO EXPLORATION, INC.
SEVERANCE BENEFIT PLAN
EFFECTIVE AS OF JULY 1, 1995
<PAGE> 2
PRESIDIO EXPLORATION, INC.
SEVERANCE BENEFIT PLAN
WITNESSETH:
WHEREAS, the Executive Committee of the Board of Directors of Presidio
Oil Company, a Delaware corporation ("Presidio"), has recommended that its
operating subsidiary, Presidio Exploration, Inc., a Colorado corporation (the
"Company"), adopt the Presidio Exploration, Inc. Severance Benefit Plan set
forth below (the "Plan"); and
WHEREAS, the Board of Directors of the Company has adopted the Plan.
NOW, THEREFORE, the Plan is hereby adopted and effective as of the 1st
day of July, 1995 to read as follows:
ARTICLE I
GENERAL SEVERANCE BENEFIT
1.01 BENEFIT. The Plan provides financial security to the extent
set forth herein to Covered Employees whose employment is terminated as the
result of a reduction in force occurring while this Plan is in effect. The
Company shall provide (or cause to be provided) severance benefits (as set
forth in Article III) to the Covered Employees (as defined in Article II)
pursuant to the terms, conditions and limitations set forth in the Plan.
ARTICLE II
COVERED EMPLOYEES
2.01 COVERED EMPLOYEES. "Covered Employee" shall mean any employee
of the Company for which all of the following criteria are met concurrent with
a Covered Employee's termination from the Company:
(a) permanent employee of the Company;
(b) performing job requirements at a satisfactory level;
(c) terminated due to a reduction in force and not as a
result of voluntary termination, poor performance, absenteeism,
tardiness, or gross misconduct;
(d) employment is not continued with an affiliate of the
Company or an acquiring or merging company; and
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<PAGE> 3
(e) employee does not receive severance benefits under a
separate severance agreement with the Company.
ARTICLE III
SEVERANCE BENEFITS
3.01 CASH PAYMENT. Each Covered Employee who is eligible for a
severance benefit shall be entitled to a cash payment in an amount equal to
one-twelfth (1/12) of the Covered Employee's annual base salary from the
Company immediately prior to the date of termination, multiplied by the sum of
two plus the number of continuous full years (a partial year shall count as a
full year) of service with the Company, Kaiser Energy, Inc., Home Petroleum
Corporation or General Atlantic Energy Corporation. Such cash payment shall be
made by the Company in semimonthly installment payments over a time period of
months equal to the sum in the previous sentence or, in the sole discretion of
the Company, in a single payment equal to the outstanding unpaid balance
thereof at any time during such period.
3.02 MITIGATION. A Covered Employee shall not be required to
mitigate the amount of any payment provided in this Article III by seeking
other employment or otherwise, nor shall the amount of any payment or benefit
provided in this Article III be reduced by any compensation earned by the
Covered Employee as a result of employment by another employer or by retirement
benefits. The benefits under the Plan are in addition to any other benefits to
which a Covered Employee is otherwise entitled.
3.03 MEDICAL BENEFITS. In addition to other amounts payable to a
Covered Employee under this Article III, each Covered Employee who is eligible
for a severance benefit shall be entitled for a six (6) month period after
termination of employment with the Company to the continuation of the dental
and medical insurance benefits in effect immediately prior to the date of
termination without any cost to the Covered Employee. Such benefits shall not
include life insurance, accidental death and dismemberment insurance, long-term
disability benefits, or similar benefits. The health and medical insurance
benefits provided hereunder shall (at the Company's discretion) be subject to
such changes, if any, made to the health and medical insurance benefits
provided to other Company employees.
3.04 RETIREMENT/SAVINGS PLAN BENEFITS. All Covered Employees being
terminated under a reduction in work force that have vested account balances in
the Presidio 401(k) Plan and/or Employee Stock Ownership Plan, both as adopted
by the Company, will receive distributions in accordance with applicable plan
provisions.
3.05 VACATION BENEFITS. All Covered Employees being terminated
under a reduction in work force will be eligible for payment of any unused
earned and accrued vacation time according to Company policy.
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<PAGE> 4
ARTICLE IV
GENERAL PROVISIONS
4.01 FUNDING. The benefits provided herein shall be unfunded and
shall be provided from the general assets of the Company.
4.02 COST OF PLAN. The entire cost of this Plan shall be borne by
the Company and no contributions shall be required of any Covered Employee.
Such costs shall include not only direct benefits paid to Covered Employees,
but also any premiums charged for insurance used to fund benefits provided
hereunder.
4.03 NAMED FIDUCIARY. The Company shall be the named fiduciary of
the Plan and shall be responsible for the management and control of the
operation and administration of the Plan including any and all decisions
pertaining to the granting or denial of benefit claims and any and all
decisions pertaining to the review of denials of benefit claims. The Company
shall have the power and responsibility to make all such decisions in its
complete and total discretion.
4.04 AMENDMENT. The Plan may be amended or terminated at any time,
and from time to time, by the Committee by a written instrument executed by a
duly authorized officer of the Company provided, however, that no amendment or
termination shall be made within two (2) years following a change in control of
Presidio which would reduce the benefits provided in Article III or modify the
coverage or eligibility requirements contained in Article II. It is the
express intent of the Company that no amendment shall be made to the Plan
within two (2) years following a change in control of Presidio which would
reduce the benefits payable to the Covered Employees that are employed by the
Company at the time of a change in control of Presidio in the event of the
termination of the Covered Employees.
4.05 CLAIMS PROCEDURE. The procedures for making claims under this
Plan are as follows:
(a) Claims for benefits under the Plan shall be made in
writing to the Company at its headquarters address and to the
attention of the Manager of Administration.
(b) If such claim for benefits is wholly or partially
denied, the Company shall, within a reasonable period of time, but no
later than thirty (30) days after receipt of the claim, notify the
claimant of the denial of the claim. Such notice of denial (i) shall
be in writing, (ii) shall be written in a manner calculated to be
understood by the claimant, and (iii) shall contain (A) the specific
reason or reasons for denial of the claim, (B) a specific reference to
the pertinent Plan provisions upon which the denial is based, (C) a
description of any material or information necessary for the claimant
to perfect the claim, along with an explanation why such material or
information is necessary, and (D) an explanation of the Plan's claim
review procedure as contained herein.
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<PAGE> 5
(c) Within thirty (30) days of the receipt by the
claimant of the written notice of denial of the claim, the claimant
may file a written request with the Company that it reconsider the
denial of the claimant's claim for benefits. In connection with the
claimant's appeal of the denial of his benefit, the claimant may
review pertinent documents and may submit issues and comments in
writing.
(d) The Company shall deliver to the claimant a written
decision on the claim promptly, but not later than thirty (30) days,
after the receipt of the claimant's request for review, except that if
there are special circumstances which require an extension of time for
processing the aforesaid thirty (30) day period shall be extended to
sixty (60) days. Such decision shall (i) be written in a manner
calculated to be understood by the claimant, (ii) include specific
reasons for the decision, and (iii) contain specific references to the
pertinent Plan provisions upon which the decision is based.
4.06 NOT CONTRACT OF EMPLOYMENT. The adoption and maintenance of
this Plan shall not be deemed to be a contract of employment between the
Company and any person or to be consideration for the employment of any person.
Nothing herein contained shall be deemed to give any person the right to be
retained in the employ of the Company or to restrict the right of the Company
to discharge any person at any time nor shall the Plan be deemed to give the
Company the right to require any person to remain in the employ of the Company
or to restrict any person's right to terminate his employment at any time.
4.07 GOVERNING LAW. This Plan shall be interpreted under the laws
of the State of Colorado except to the extent pre-empted by federal law.
4.08 GENDER. Wherever in this instrument words are used in the
masculine or neuter gender, they shall be read and construed as in the
masculine, feminine or neuter gender whenever they would so apply, and vice
versa. Wherever words appear in the singular or plural, they shall be read and
construed as in the plural or singular, respectively, wherever they would so
apply.
4.09 HEADINGS. The headings of the Articles and Sections herein
are included solely for reference convenience and shall not in any way affect
the meaning or interpretation of the Plan.
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<PAGE> 1
EXHIBIT 10.3
KEY EMPLOYEE SEVERANCE AGREEMENT
KEY EMPLOYEE SEVERANCE AGREEMENT (the "Agreement"), dated as of July
25, 1995 between PRESIDIO EXPLORATION, INC., a Colorado corporation (the
"Company"), and GEORGE P. GIARD, JR. ( "Executive").
WHEREAS, the Board of Directors (the "POC Board") of Presidio Oil
Company ("Presidio") has recommended that the Company enter into a severance
agreement in the form hereof with Executive;
WHEREAS, the Board of Directors (the "Board") has authorized the
Company to enter into a severance agreement in the form hereof with Executive;
WHEREAS, the POC Board has authorized the management of Presidio and
the Company to negotiate a recapitalization of Presidio with certain of the
holders of its securities which may involve a Change of Control (as defined in
Section 2(c) hereof) (the "Recapitalization");
WHEREAS, the POC Board and the Board have each determined that, pending
the consummation of the transactions involved in the Recapitalization, it is
imperative that the Company and the Board be able to rely upon Executive to
continue in Executive's position, and that the Company be able to receive and
rely upon Executive's advice, if requested, as to the best interests of the
Company and its shareholders without concern that Executive might be distracted
by the personal uncertainties and risks created by such proposed transactions;
WHEREAS, in the event that the transactions contemplated by the
Recapitalization are not consummated, it is possible that Presidio and the
Company may nevertheless seek to sell a significant amount of the operating
assets of the Company (an "Asset Acquisition" as defined in Section 2(c)
hereof) to another Person (as defined in Section 2(c) hereof) or Presidio and
the Company may enter into another transaction which would involve a Change in
Control or Presidio or the Company may become subject to a proposed or
threatened Change in Control; and
WHEREAS, in connection with the foregoing, Executive may, in addition
to Executive's regular duties, be called upon to assist in the assessment of
any such proposals, advise management, the POC Board and the Board as to
whether such proposals would be in the best interests of the Company, Presidio
and their respective shareholders, and to take such other actions as the POC
Board and the Board might determine to be appropriate.
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of Executive and the availability of Executive's advice and counsel
notwithstanding the anticipated consummation of the transactions contemplated
by the Recapitalization, an
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<PAGE> 2
Asset Acquisition or, if neither of such transactions are consummated, the
possibility, threat or occurrence of a similar transaction or other Change of
Control, and to induce Executive to remain in the employ of the Company, and
for other good and valuable consideration, the Company and Executive agree as
follows:
1. SERVICES DURING CERTAIN EVENTS.
(a) Executive agrees that Executive will not voluntarily
leave the employ of the Company, and will render the services
contemplated in the recitals to this Agreement, during the pendency of
the transactions contemplated by the Recapitalization and until such
transactions have been consummated or the discussions relating to the
Recapitalization are terminated.
(b) In the event an Asset Acquisition with a Person other
than the Company is proposed or a Person begins a tender or exchange
offer or takes other steps to effect a Change in Control, Executive
agrees that Executive will not voluntarily leave the employ of the
Company, and will render the services contemplated in the recitals to
this Agreement, until such Asset Acquisition is effected or terminated
or such Person has abandoned or terminated its efforts to effect a
Change in Control or until a Change in Control has occurred.
2. TERMINATION FOLLOWING CERTAIN EVENTS. Except as provided in
Section 4 hereof, the Company will provide or cause to be provided to Executive
the rights and benefits described in Section 3 hereof in the event that
Executive's employment by the Company is terminated within two (2) years
following the Recapitalization, an Asset Acquisition, or a Change in Control
(or, if prior to the Recapitalization, an Asset Acquisition or a Change in
Control, the Executive's employment by the Company is terminated and if it is
reasonably demonstrated by the Executive that such termination of employment
was at the request of a third party who has taken steps reasonably calculated
to effect the Recapitalization, an Asset Acquisition or a Change of Control or
otherwise arose in connection with or anticipation of the Recapitalization, an
Asset Acquisition or a Change in Control) and such termination is instituted:
(a) by the Company for reasons other than:
(i) cause (as defined in Section 4(a) hereof),
(ii) Executive's death or disability, or
(iii) Executive's retirement upon reaching age 65
("Normal Retirement Date"), or
(b) by Executive following the occurrence of any of the
following events without Executive's written consent (but in no event
upon termination for cause, as so defined, by the Company):
(i) the assignment of Executive to any duties or
responsibilities that
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<PAGE> 3
are materially inconsistent with Executive's position and
status with the Company immediately prior to the
Recapitalization, an Asset Acquisition or Change in Control,
(ii) the reduction of Executive's Earnings (as
defined in Section 3(a)) (including any deferred portion
thereof),
(iii) a diminution in (A) Executive's eligibility
to participate in bonus, stock option, incentive award and
other compensation plans or (B) employee benefits (including
but not limited to medical, dental, life insurance, long term
disability and supplemental employee retirement plans) and
perquisites applicable to Executive which Executive were
participating immediately prior to the date of Termination, or
(iv) a change in the location of Executive's
principal place of employment by the Company from the location
where Executive was principally employed immediately prior to
the date of Termination.
(c) Certain Definitions. For purposes of this Agreement:
(i) an "Asset Acquisition" shall be deemed to
have occurred if any Person, a group or groups of related or
unrelated Persons acquires more than fifty-one percent (51%)
in value of the oil and gas properties of the Company pursuant
to one or more transactions with the Company during the term
of this Agreement.
(ii) a "Change in Control" shall be deemed to have
occurred if (A) any Person is or becomes the Beneficial Owner
(as defined in Section 2(c) hereof) of securities of Presidio
representing thirty percent (30%) or more of the Voting Power
(as defined in Section 2(c) hereof), (B) there shall occur a
change in the composition of a majority of the POC Board
within any period of four (4) consecutive years which change
shall not have been approved by a majority of the POC Board as
constituted immediately prior to such change in composition,
(C) at any meeting of the shareholders of Presidio called for
the purpose of electing directors, more than one of the
persons nominated by the POC Board for election as directors
shall fail to be elected, or (D) the consummation of a merger,
consolidation, sale of substantially all assets or other
reorganization of Presidio, other than a reincorporation, in
which Presidio does not survive.
(iii) (A) "Person" shall have the meaning set forth
in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange
Act of 1934, as in effect on May 1, 1995, (B) "Beneficial
Owner" shall have the meaning set forth in Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934, as in effect
on May 1, 1995, and (C) "Voting Power" shall mean the voting
power of the outstanding securities of Presidio having the
right under ordinary circumstances to vote at an election of
the POC Board.
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<PAGE> 4
3. RIGHTS AND BENEFITS UPON TERMINATION. In the event Executive
is entitled pursuant to Section 2 hereof to receive the rights and benefits
described in this Section 3 as a result of the termination of Executive's
employment ("Termination"), the Company agrees to provide or cause to be
provided to Executive the following rights and benefits:
(a) Cash Payment. Executive shall be entitled to receive
not later than five (5) days following Termination a lump-sum payment
in cash in an amount equal to twenty (20) times one-twelfth (1/12) of
the Executive's Earnings (as such term is defined below). For
example, if such lump-sum payment were to be payable as of the date of
this Agreement, this lump-sum payment would be $637,500, and would be
calculated on the basis of multiplying 20 times 1/12 of $382,500,
which amount is equal to the sum of the Executive's base salary for
the twelve months period preceding July 31, 1995 ($360,000) and the
Company's contributions ($22,500) in respect of its 401 (K) Plan and
its Stock Ownership Plan for the Executive in respect of such twelve
month period. For purposes of this Agreement, "Earnings" shall mean
the total of (i) the base salary paid to Executive during the twelve
month period preceding Termination from the Company without giving
effect to any reduction thereof that may have been made without
Executive's consent; and (ii) the amount of Company contributions
consistent with the Company's past practices which would have been
made on Executive's behalf in respect of such base salary had he
continued to participate in the Company's 401(k) Plan and the
Company's Employee Stock Ownership Plan for one (1) full plan year.
(b) Insurance and Other Similar Benefits. To the extent
Executive is eligible thereunder, Executive shall continue to be
covered by the life insurance, medical and dental plans, and accident
and disability plans of the Company or any successor plan or program
in effect at Termination for employees in the same class or category
as Executive, subject to the terms of such plans and to Executive's
making any required contributions thereto, for a period of the
equivalent number of months of severance pay paid plus, following the
end of the last month of severance pay, all benefits required by the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") (or
until Executive's Normal Retirement Date, whichever is sooner). In
the event Executive is ineligible to continue to be so covered under
the terms of any such benefit plan or program, or, in the event
Executive is eligible but the benefits applicable to Executive are not
substantially equivalent to the benefits applicable to Executive
immediately prior to Termination, for a period of the equivalent
number of months of severance pay paid plus, following the end of the
last month of severance pay, all benefits required by COBRA (or until
Executive's Normal Retirement Date, whichever is sooner), the Company
shall provide to Executive through other sources such benefits,
including such additional benefits, as may be necessary to make the
benefits applicable to Executive substantially equivalent (on an
after-tax basis) to those in effect before Termination; provided,
however, that if during such period Executive should enter into the
employ of another company or firm which provides health benefits
(similar in scope to those currently provided by the Company) to its
executives in general, the Company's obligations to provide such
benefits shall cease. Nothing contained in this paragraph shall be
deemed to require or cause termination or restriction of
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any of Executive's coverages under any such benefit plan or program of
the Company or any of its subsidiaries or any successor plan or
program thereto to which Executive is entitled under the terms of such
plan or program, whether at the end of the aforementioned equivalent
number of months of severance pay paid or at any other time.
(c) Other Benefit Plans. The specific arrangements
referred to in this Section 3 are not intended to require or to
exclude Executive's continued participation in other benefit plans in
which Executive currently participates or which are available to
executive personnel generally in the class or category of Executive or
to preclude other compensation or benefits as may be authorized by the
Board from time to time.
(d) Duty to Mitigate. Executive's entitlement to
benefits hereunder shall not be governed by any duty to mitigate
Executive's damages by seeking further employment nor offset by any
compensation which Executive may receive from future employment.
4. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The Company
shall have no obligation to provide or cause to be provided to Executive the
rights and benefits described in Section 3 hereof if either of the following
events shall occur:
(a) the Company shall terminate Executive's employment
for (i) dishonesty, (ii) conviction of a felony, or (iii) the
continued failure by Executive to perform the material duties assigned
to Executive that are consistent with the position of Executive with
the Company and that would not permit Executive to terminate
employment pursuant to Section 2 after notice of such failure has been
given by the Company and a reasonable opportunity to cure is provided
to Executive (termination for "cause"); or
(b) Executive shall not, promptly after Termination and
upon receiving a written request to do so, resign as a director or
officer of Presidio, the Company and each subsidiary and affiliate of
Presidio or the Company of which Executive is then serving as a
director or officer.
5. CONFIDENTIALITY AND CONSULTANCY.
(a) Confidentiality. Executive agrees that at all times
following Termination, Executive will not, without the prior written
consent of the Company, disclose to any person, firm or corporation
any confidential information of Presidio, the Company or its
subsidiaries which is now known to Executive or which hereafter may
become known to Executive as a result of his employment or association
with the Company and which could be helpful to a competitor, unless
such disclosure is required under the terms of a valid and effective
subpoena or order issued by a court or governmental body; provided,
however, that the foregoing shall not apply to confidential
information which becomes publicly disseminated by means other than a
breach of this Agreement.
-5-
<PAGE> 6
(b) Consultation. Executive agrees that, for a period of
one (1) year following the date of Termination, Executive will use
reasonable efforts to be available to the Company for consultation
with the POC Board, the Board and senior officers of the Company;
provided, however, that Executive shall not be required to perform
consulting services (i) for more than three (3) days in any month or
(ii) for more than ten (10) hours in any month. It is expressly
agreed that Executive's consulting services will be required at such
time and such places as will result in the least inconvenience to
Executive, taking into consideration Executive's other business
commitments during such period which may obligate Executive to honor
such other commitments prior to Executive's rendering services
hereunder. It is further agreed that Executive's consulting services
shall be rendered by personal consultation at Executive's principal
residence or office, wherever maintained, or by correspondence through
mail, telephone or telegraph or other similar modes of communication
at times, including weekends and evenings, most convenient to
Executive. The Company and Executive agree that if, during such
period, Executive should enter into the full-time employ of another
company or firm, Executive shall not be required to consult at times
that will conflict with Executive's responsibilities with respect to
such employment.
(c) Remedies for Breach. It is recognized that damages
in the event of breach of this Section 5 by Executive would be
difficult, if not impossible, to ascertain, and it is therefore agreed
that the Company, in addition to and without limiting any other remedy
or right it may have, shall have the right to an injunction or other
equitable relief in any court of competent jurisdiction enjoining any
such breach, and Executive hereby waives any and all defenses
Executive may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief.
The existence of this right shall not preclude the Company from
pursuing any other rights and remedies at law or in equity which the
Company may have.
6. REDUCTION IN PAYMENTS. Notwithstanding the provisions of
Section 3(a) hereof, in no event shall any payment to be made under Section
3(a) exceed $1.00 less than three times the Executive's "base amount" within
the meaning of Section 280 G of the Internal Revenue Code of 1986, as amended
(the "Code"). If any portion of the payments or benefits to be made available
to Executive pursuant to Section 3 would be considered an "excess parachute
payment" within the meaning of Section 280G of the Code, the amount of cash
otherwise payable to Executive pursuant to Section 3(a) hereof shall be reduced
to the extent (but only to the extent) necessary to cause no portion of the
payments or benefits made available to the Executive pursuant to Section 3
hereof to be considered an " excess parachute payment" within the meaning of
Section 280G of the Code. Deloitte & Touche LLP or such other accounting firm
that may be agreed upon by the Company and the Executive (the "Accounting
Firm") shall determine the Executive's "base amount" and the amount of any
"excess parachute payments" for purposes of this Section 6. All determinations
made by the Accounting Firm shall be made within 60 days of Termination and
shall be binding on the Company and the Executive. All fees and expenses of
the Accounting Firm shall be borne solely by the Company.
-6-
<PAGE> 7
7. TERM OF AGREEMENT. This Agreement shall remain in full force
and effect through December 31, 1999, and, beginning each January 1st
thereafter, this Agreement shall be automatically extended for additional one
(1) year periods, unless by September 30th of any year the Company gives notice
that this Agreement will not be so extended. Notwithstanding the foregoing,
the term of this Agreement is automatically extended for a minimum of
twenty-four (24) months following the Recapitalization, an Asset Acquisition or
a Change of Control.
8. MISCELLANEOUS.
(a) Assignment. No right, benefit or interest hereunder
shall be subject to assignment, anticipation, alienation, sale,
encumbrance, charge, pledge, hypothecation or set-off in respect of
any claim, debt or obligation, or to execution, attachment, levy or
similar process; provided, however, that Executive may assign any
right, benefit or interest hereunder if such assignment is permitted
under the terms of any plan or policy of insurance or annuity contract
governing such right, benefit or interest.
(b) Construction of Agreement. Except as expressly
provided herein, nothing in this Agreement shall be construed to amend
any provision of any plan or policy of the Company or Presidio. This
Agreement is not, and nothing herein shall be deemed to create, a
commitment of continued employment of Executive by the Company or
Presidio. The benefits provided under this Agreement shall be in
addition to any other compensation agreement or arrangement that the
Company or Presidio may have with Executive.
(c) Amendment. This Agreement may not be amended,
modified or cancelled except by written agreement of the parties.
(d) Waiver. No provision of this Agreement may be waived
except by a writing signed by the party to be bound thereby.
(e) Severability. In the event that any provision or
portion of this Agreement shall be determined to be invalid or
unenforceable for any reason, the remaining provisions of this
Agreement shall remain in full force and effect to the fullest extent
permitted by law.
(f) Successors.
(i) The Company will require any successor,
whether direct or indirect, by purchase, merger, consolidation
or otherwise, to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no
such succession had taken place.
-7-
<PAGE> 8
(ii) This Agreement shall inure to the benefit of,
and be enforceable by, Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legates. If the Executive dies
prior to the receipt of all benefits payable hereunder with
respect to events occurring prior to death, all such benefits
shall be paid pursuant to the last beneficiary designation
executed by the Executive and filed with the Company or
Presidio. If no beneficiary form has been filed with respect
to this Agreement, all such benefits shall be paid to the
Executive's estate.
(g) Taxes. Any payment or delivery required under this
Agreement shall be subject to all requirements of the law with regard
to withholding of taxes, filing, making of reports and the like, and
the Company shall use its best efforts to satisfy promptly all such
requirements.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO,
WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS PRINCIPLES.
(i) Not Contract of Employment. Subject to the
provisions of Sections 1 (a) and (b), and Section 3, of this
Agreement, the entering into of this Agreement shall not be deemed to
be a contract of employment between the Company and the Executive, or
to be consideration for the employment of the Executive, and thus
nothing herein contained shall be deemed to give the Executive the
right to be retained in the employ of the Company or to restrict the
right of the Company to discharge the Executive at any time.
(j) Gender. Wherever in this instrument words are used
in the masculine or neuter gender, they shall be read and construed as
in the masculine, feminine or neuter gender wherever they would so
apply, and vice versa. Wherever words appear in the singular or
plural, they shall be read and construed as in the plural or singular,
respectively, wherever they would so apply.
(k) Headings. The headings of the Sections herein are
included solely for reference convenience, and shall not in any way
affect the meaning or interpretation of the Agreement.
(l) Entire Agreement. This Agreement sets forth the
entire agreement and understanding of the parties hereto with respect
to the matters covered hereby.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
PRESIDIO EXPLORATION, INC.
By: /s/ Robert L. Smith
-------------------
Robert L. Smith
President
EXECUTIVE
By: /s/ George P. Giard, Jr.
------------------------
George P. Giard, Jr.
-9-
<PAGE> 10
PRESIDIO OIL COMPANY
SCHEDULE OF KEY EMPLOYEE SEVERANCE AGREEMENTS
Name/Number of Months
---------------------
Giard, George P., Jr. (20)
Smith, Robert L. (19)
Lieberman, Stephen A. (12)
Colby, Bradley M. (12)
Mazza, Thomas A. (12)
DeBoer, Bruce R. (12)
Brammeier, Charles E., Jr. (12)
Erickson, Donald M., Jr. (12)
Tipton, D. Steven (12)
Houghton, Gary E. (12)
Anderson, Gregory P. (12)
Williams, Judson (12)
Kerr, Edgar W. (12)
Munsell, Marshall L. (12)
Binion, Mona L. (12)
Bergmann, Mary E. (12)
<PAGE> 1
EXHIBIT 10.4
AMENDMENT TO KEY EMPLOYEE SEVERANCE AGREEMENTS
WHEREAS, the Board of Directors of Presidio Oil Company ("Presidio")
and the Board of Directors of Presidio Exploration, Inc. ("Presidio
Exploration") have approved the Key Employee Severance Agreements (the
"Agreements") dated as of July 25, 1995 between Presidio and George P. Giard,
Jr. ("Giard") and Robert L. Smith ("Smith"), (together, the "Executives"); and
WHEREAS, it is recommended that special recognition is appropriate for
obtaining the highest possible sales value for Presidio or Presidio
Exploration's assets, which will require special dedication and efforts on the
part of the Executives.
It is hereby agreed that the Agreements, notwithstanding anything to
the contrary therein, shall be amended such that the Rights and Benefits upon
Termination provided in Section 3 of the Agreements in respect of each of the
Executives will be based upon the following number of months of severance pay,
subject to the limitation of Section 6 of the Agreements, as follows:
<TABLE>
<CAPTION>
VALUE RECEIVED (1) # OF MONTHS SEVERANCE
---------------------
($MM) GIARD SMITH
------------------------- ----- -----
<S> <C> <C>
over 190 20 19
over 195 21 20
over 200 22 21
over 205 23 22
over 210 24 23
over 215 25 24
over 220 26 25
over 225 27 26
over 230 28 27
over 235 29 28
over 240 30 29
over 245 30 30
</TABLE>
(1) "Value Received" refers to the consideration (the
"Consideration") received in any offer accepted by Presidio
and/or Presidio Exploration in respect of the sale of the oil,
gas and related assets (the "Assets") of Presidio Exploration
(or a similar transaction relating to the Assets such as a
merger involving Presidio and/or Presidio Exploration) and
which further results in either an Asset Acquisition as
defined in Section 2 (c) (i) of the Agreements or in a Change
of Control as defined in Section 2 (c) (ii) (D) of the
Agreements. The Consideration may consist of cash and/or
securities and shall include both (a) the total amount of net
consideration available to the holders of Presidio's bank and
public debt and its stockholders and (b) the total amount of
net liabilities assumed by the purchaser of the Assets,
including both Presidio's balance sheet and off-balance sheet
liabilities.
-1-
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Amendment to Key
Employee Severance Agreements on August 16, 1995 but effective as of July 25,
1995.
PRESIDIO EXPLORATION, INC.
By: /s/ Judson Williams
------------------------------
Judson Williams, Treasurer
EXECUTIVES
By: /s/ George P. Giard, Jr.
-------------------------------
George P. Giard, Jr.
By: /s/ Robert L. Smith
-------------------------------
Robert L. Smith
-2-
<PAGE> 1
EXHIBIT 10.5
FIRST AMENDMENT TO
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
This First Amendment (the "Amendment") to Supplemental Executive
Retirement Agreement (the "Agreement") is made and entered into at Englewood in
Colorado on the 26th day of October, 1995, by and between PRESIDIO OIL COMPANY
(the "Company") and GEORGE P. GIARD, JR. (the "Executive").
WHEREAS, the Board of Directors of the Company has authorized the
Company to negotiate an Asset Acquisition (as defined below) or a
Recapitalization (as defined below) of the Company with certain of the holders
of its securities which may result in a Change of Control (as defined below);
and
WHEREAS, the Board of Directors of the Company has determined that,
pending the consummation of any such transactions, it is imperative that the
Company be able to rely upon the Executive to continue in the Executive's
position and that the Company be able to receive and rely upon the Executive's
advice, if requested, as to the best interest of the Company, and its
shareholders without concern that the Executive might be distracted by the
personal uncertainties and risk created by the proposed transactions.
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Executive and the availability of the Executive's advice and
counsel notwithstanding the anticipated consummation of the foregoing
transactions and to induce the Executive to remain in the employ of the
Company, and for other good and valuable consideration, the Company and the
Executive agree as follows:
1. Section 2.5 of the Agreement is deleted in its entirety and
replaced by the following:
"2.5 TERMINATION PRIOR TO RETIREMENT.
(a) Upon the Executive's Termination of
employment with the Company (other than Termination for Cause
or a Termination specified in paragraph (b) below) prior to
Normal Retirement or Early Retirement and when the Executive
is Vested, he will receive benefits in accordance with
Sections 2.1, 2.3 and 2.4 of this Agreement (using his
Retirement Percentage and Final Average Earnings as of the
date of Termination of employment), commencing on the last day
of the calendar month following the month in which the
Executive attains age 65.
(b) Upon the Executive's Termination of
employment with the
-1-
<PAGE> 2
Company (other than a Termination for Cause) (i) prior to
Normal Retirement or Early Retirement, (ii) when the Executive
is Vested and (iii) within two (2) years following the
Recapitalization, an Asset Acquisition or a Change in Control
(or, if prior to the Recapitalization, an Asset Acquisition or
a Change in Control, the Executive's Termination of employment
is reasonably demonstrated by the Executive to be at the
request of a third party who has taken steps reasonably
calculated to effect the Recapitalization, an Asset
Acquisition or a Change of Control or otherwise arose in
connection with or anticipation of the Recapitalization, an
Asset Acquisition or a Change in Control), he will have the
option by delivery of written notice to the Company no later
than three (3) days following his Termination of employment to
receive benefits as set forth in paragraph (a) above or in a
lump sum payment payable not later than five (5) days
following his Termination of employment in an amount equal to
the Present Value of the benefits he is otherwise entitled to
receive in accordance with paragraph (a) above."
2. Article VI of the Agreement is amended by adding the following
definitions thereto:
An "Asset Acquisition" shall be deemed to have occurred if any
Person, a group or groups of related or unrelated Persons
acquires more than fifty-one percent (51%) in value of the oil
and gas properties of the Company pursuant to one or more
transactions with the Company during the term of this
Agreement.
"Beneficial Owner" shall have the meaning set forth in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as
in effect on May 1, 1995.
A "Change in Control" shall be deemed to have occurred if (i)
any Person is or becomes the Beneficial Owner of securities of
the Company representing thirty percent (30%) or more of the
Voting Power, (ii) there shall occur a change in the
composition of a majority of the Board within any period of
four (4) consecutive years which change shall not have been
approved by a majority of the Board as constituted immediately
prior to such change in composition, (iii) at any meeting of
the shareholders of the Company called for the purpose of
electing directors, more than one of the persons nominated by
the Board for election as directors shall fail to be elected,
or (iv) the consummation of a merger, consolidation, sale of
substantially all assets or other reorganization of the
Company, other than a reincorporation, in which the Company
does not survive.
"Person" shall have the meaning set forth in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934, as in
effect on May 1, 1995.
-2-
<PAGE> 3
"Present Value" shall be calculated by utilizing a discount
factor equal to the prime rate published by The Chase
Manhattan Bank, N.A. as of the date of Termination of
employment.
The "Recapitalization" shall be deemed to have occurred if the
capital structure of the Company is changed in respect of the
holders of its debt securities which may involve a Change of
Control.
"Voting Power" shall mean the voting power of the outstanding
securities of the Company having the right under ordinary
circumstances to vote at an election of the Board.
3. Except as expressly amended hereby, the Agreement shall remain
in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Amendment on the date first written above.
PRESIDIO OIL COMPANY
By: /s/ Judson Williams
-------------------------------
Judson Williams, Treasurer
EXECUTIVE
By: /s/ George P. Giard, Jr.
------------------------------
George P. Giard, Jr.
-3-
<PAGE> 4
FIRST AMENDMENT TO
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
This First Amendment (the "Amendment") to Supplemental Executive
Retirement Agreement (the "Agreement") is made and entered into at Englewood in
Colorado on the 26th day of October, 1995, by and between PRESIDIO OIL COMPANY
(the "Company") and ROBERT L. SMITH (the "Executive").
WHEREAS, the Board of Directors of the Company has authorized the
Company to negotiate an Asset Acquisition (as defined below) or a
Recapitalization (as defined below) of the Company with certain of the holders
of its securities which may result in a Change of Control (as defined below);
and
WHEREAS, the Board of Directors of the Company has determined that,
pending the consummation of any such transactions, it is imperative that the
Company be able to rely upon the Executive to continue in the Executive's
position and that the Company be able to receive and rely upon the Executive's
advice, if requested, as to the best interest of the Company, and its
shareholders without concern that the Executive might be distracted by the
personal uncertainties and risk created by the proposed transactions.
NOW, THEREFORE, to assure the Company that it will have the continued
dedication of the Executive and the availability of the Executive's advice and
counsel notwithstanding the anticipated consummation of the foregoing
transactions and to induce the Executive to remain in the employ of the
Company, and for other good and valuable consideration, the Company and the
Executive agree as follows:
1. Section 2.5 of the Agreement is deleted in its entirety and
replaced by the following:
"2.5 TERMINATION PRIOR TO RETIREMENT.
(a) Upon the Executive's Termination of
employment with the Company (other than Termination for Cause
or a Termination specified in paragraph (b) below) prior to
Normal Retirement or Early Retirement and when the Executive
is Vested, he will receive benefits in accordance with
Sections 2.1, 2.3 and 2.4 of this Agreement (using his
Retirement Percentage and Final Average Earnings as of the
date of Termination of employment), commencing on the last day
of the calendar month following the month in which the
Executive attains age 65.
(b) Upon the Executive's Termination of
employment with the
-1-
<PAGE> 5
Company (other than a Termination for Cause) (i) prior to
Normal Retirement or Early Retirement, (ii) when the Executive
is Vested and (iii) within two (2) years following the
Recapitalization, an Asset Acquisition or a Change in Control
(or, if prior to the Recapitalization, an Asset Acquisition or
a Change in Control, the Executive's Termination of employment
is reasonably demonstrated by the Executive to be at the
request of a third party who has taken steps reasonably
calculated to effect the Recapitalization, an Asset
Acquisition or a Change of Control or otherwise arose in
connection with or anticipation of the Recapitalization, an
Asset Acquisition or a Change in Control), he will have the
option by delivery of written notice to the Company no later
than three (3) days following his Termination of employment to
receive benefits as set forth in paragraph (a) above or in a
lump sum payment payable not later than five (5) days
following his Termination of employment in an amount equal to
the Present Value of the benefits he is otherwise entitled to
receive in accordance with paragraph (a) above."
2. Article VI of the Agreement is amended by adding the following
definitions thereto:
An "Asset Acquisition" shall be deemed to have occurred if any
Person, a group or groups of related or unrelated Persons
acquires more than fifty-one percent (51%) in value of the oil
and gas properties of the Company pursuant to one or more
transactions with the Company during the term of this
Agreement.
"Beneficial Owner" shall have the meaning set forth in Rules
13d-3 and 13d-5 under the Securities Exchange Act of 1934, as
in effect on May 1, 1995.
A "Change in Control" shall be deemed to have occurred if (i)
any Person is or becomes the Beneficial Owner of securities of
the Company representing thirty percent (30%) or more of the
Voting Power, (ii) there shall occur a change in the
composition of a majority of the Board within any period of
four (4) consecutive years which change shall not have been
approved by a majority of the Board as constituted immediately
prior to such change in composition, (iii) at any meeting of
the shareholders of the Company called for the purpose of
electing directors, more than one of the persons nominated by
the Board for election as directors shall fail to be elected,
or (iv) the consummation of a merger, consolidation, sale of
substantially all assets or other reorganization of the
Company, other than a reincorporation, in which the Company
does not survive.
"Person" shall have the meaning set forth in Sections 3(a)(9)
and 13(d)(3) of the Securities Exchange Act of 1934, as in
effect on May 1, 1995.
-2-
<PAGE> 6
"Present Value" shall be calculated by utilizing a discount
factor equal to the prime rate published by The Chase
Manhattan Bank, N.A. as of the date of Termination of
employment.
The "Recapitalization" shall be deemed to have occurred if the
capital structure of the Company is changed in respect of the
holders of its debt securities which may involve a Change of
Control.
"Voting Power" shall mean the voting power of the outstanding
securities of the Company having the right under ordinary
circumstances to vote at an election of the Board.
3. Except as expressly amended hereby, the Agreement shall remain
in full force and effect in accordance with its terms.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Amendment on the date first written above.
PRESIDIO OIL COMPANY
By: /s/ Judson Williams
----------------------------------
Judson Williams, Treasurer
EXECUTIVE
By: /s/ Robert L. Smith
----------------------------------
Robert L. Smith
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 8,543
<SECURITIES> 0
<RECEIVABLES> 6,524
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,153
<PP&E> 515,317
<DEPRECIATION> 298,949
<TOTAL-ASSETS> 242,160
<CURRENT-LIABILITIES> 275,764
<BONDS> 0
<COMMON> 2,854
0
0
<OTHER-SE> (47,435)
<TOTAL-LIABILITY-AND-EQUITY> 242,160
<SALES> 23,708
<TOTAL-REVENUES> 23,708
<CGS> 0
<TOTAL-COSTS> 21,259
<OTHER-EXPENSES> 4,779
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,839
<INCOME-PRETAX> (24,169)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,169)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,169)
<EPS-PRIMARY> (.89)
<EPS-DILUTED> (.89)
</TABLE>
