<PAGE>
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________
FORM 10-K/A
AMENDMENT NO. 1 TO
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 COMMISSION FILE NUMBER 0-616094
_________
EASTEX ENERGY INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2172796
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1100 FIRST INTERSTATE BANK PLAZA
1000 LOUISIANA
HOUSTON, TEXAS 77002
(Address of Principal Executive Offices) (Zip code)
Registrant's telephone number, including area code: (713) 650-6255
_________
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
- - --------------------------------------------------------------------------------
<PAGE>
This Amendment No. 1 on Form 10-K/A amends the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 to include information for
Items 10, 11, 12 and 13 of such Form which were intended to be included in the
Proxy Statement for the 1995 Annual Meeting. The Registrant amends the Form
10-K for such information as the Proxy Statement will not be filed before
120 days after the fiscal year end.
2
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Directors of the Company hold office until the annual meeting of
stockholders following their election or appointment and until their successors
have been duly elected and qualified. Officers of the Company are elected by
the Board of Directors of the Company and serve at its discretion. The names,
ages, positions held with the Company, period of time such positions have been
held and business experience during the past five years for the directors,
officers and significant employees of the Company serving as of March 31, 1995,
are as follows:
<TABLE>
<CAPTION>
POSITION(S)
HELD
NAME AGE POSITION(S) SINCE
- - -------------------------- --- ---------------------------------- -----------
<S> <C> <C> <C>
Robert G. Phillips (1)(2). 40 Chairman of the Board, 1981
Chief Executive Officer
and Director
Mark A. Searles........... 39 President, Chief Operating 1994
Officer and Director
David H. Eargle........... 40 Executive Vice President and 1983
Director
Terry L. Morrison......... 32 Vice President - Gas Trading 1995
Jerry L. Pendleton........ 52 Vice President - Management 1990
Information Systems
R. Cris Sherman........... 35 Vice President and Chief Financial 1993
Officer (Chief Accounting
Officer)
Merrell A. Athon (2)...... 45 Director 1993
James E. Haynes (1)(3).... 70 Director 1987
James N. Winfrey (1)(2)(3) 49 Director 1990
</TABLE>
- - --------------------
(1) Member of the Compensation Committee of the Board of Directors.
(2) Member of the Executive Committee of the Board of Directors.
(3) Member of the Audit Committee of the Board of Directors.
Mr. Phillips has been Chief Executive Officer of the Company since March
1983 and a Director of the Company since November 1981. He was elected Chairman
of the Board in 1987.
Mr. Searles has been President and Chief Operating Officer of the Company
since May 1994 and a Director of the Company since June 1994. Prior to joining
the Company, Mr. Searles served in a variety of positions with Enron Corp. since
1985, including President of Enron Gas Marketing Canada, Inc., a subsidiary of
Enron Corp., at the time of his employment with the Company. Prior thereto, Mr.
Searles was employed by Gulf Oil Corporation in their exploration and production
operations.
Mr. Eargle has been the Executive Vice President of the Company since May
1990 and a Director of the Company since June 1987. He served as Vice President
- - - Pipelines and Storage and as Vice President - Gas Supply and Marketing for the
Company from March 1983 to May 1990.
3
<PAGE>
Mr. Morrison was elected Vice President - Gas Trading of the Company in
January 1995. Prior thereto, he served the Company as Vice President - Merchant
Services from January 1994 to January 1995, Director - Midwest Marketing from
August 1992 to January 1994 and Manager - West Coast Marketing from August 1990
to August 1992.
Mr. Pendleton was elected Vice President - Management Information Systems
in June 1993 and served as Chief Accounting and Information Officer of the
Company from August 1990 to June 1993. He also held the title of Controller of
the Company from August 1990 until May 1992. Mr. Pendleton served as Manager -
Information Systems for the Company from June 1989 to August 1990. Prior to his
employment by the Company, he was employed by Phillips Petroleum Company from
1985 to 1989 as a Senior System Specialist.
Mr. Sherman was elected Vice President and Chief Financial Officer of the
Company in January 1995. Prior thereto, he served as Vice President and
Controller of the Company from June 1993 to January 1995 and Controller of the
Company from May 1992 to June 1993. Mr. Sherman was employed as Manager of
Accounting of the Company from November 1990 to May 1992. From 1988 to 1990, he
was employed as Vice President and Controller of Houston Gas Exchange
Corporation, a national gas gathering and marketing company. From 1985 to 1988,
Mr. Sherman served as Manager of Accounting for the Company.
Mr. Athon has served as Director of the Company since January 1993. Mr.
Athon is a General Partner of Wareing, Athon and Company, an investment
partnership located in Houston, Texas. He is also a General Partner of Woodbine
Properties, an oil and gas exploration and production company, and a General
Partner of Lone Star Overnight, L.P., a regional overnight express package
shipping company. Mr. Athon serves as a Director of Texas Cold Storage, Inc., a
cold storage company; Gulf Coast Pre-Stress Company, Inc., a manufacturer of
pre-stressed concrete products; and Property Damage Appraisers; all of which are
privately-held companies.
Mr. Haynes has served as Director of the Company since June 1987. He is
currently retired. Prior to his retirement, Mr. Haynes served in a variety of
positions with United Gas Pipeline Company (predecessor to Koch Gateway Pipeline
Company), a major intrastate natural gas transmission company ("UGPL"), from
1948 until his retirement in 1986. At the time of his retirement, he served
UGPL as Executive Vice President and Director.
Mr. Winfrey has served as a Director of the Company since January 1990. He
is currently the President of Winfrey & Associates, Inc., an investment banking
firm. Previously, Mr. Winfrey served as Managing Director of Kemper Securities,
Inc., a national investment banking firm, from February 1985 to November 1992.
He also serves as a Director of the Retina Research Foundation.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than ten
percent of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission (the "SEC") initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. Officers, directors and greater than ten percent beneficial
owners are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms which they filed. To the Company's knowledge, based solely
on review of copies of these reports furnished to the Company during the fiscal
year ended December 31, 1994 and written representations, its officers,
directors and greater than ten percent beneficial owners complied with all
applicable Section 16(a) filing requirements.
4
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ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid by the Company to its
Chief Executive Officer and the other four most highly compensated executive
officers of the Company who were serving as executive officers of the Company as
of December 31, 1994 and as to whom the total annual salary and bonus from the
Company for the fiscal year ended December 31, 1994 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------
OTHER SECURITIES
NAME AND ANNUAL RESTRICTED UNDERLYING
PRINCIPAL COMPEN- STOCK OPTIONS/ ALL OTHER
POSITION YEAR SALARY BONUS SATION AWARDS SARS COMPENSATION
- - --------------------- ---- ----------- -------- ----------- ----------- ---------- -------------
(A) (A)(B) (C) (B)
<S> <C> <C> <C> <C> <C> <C> <C>
Robert G. Phillips, 1994 $291,666(d) $ 7,605 $ 7,605 - - -
Chairman and 1993 300,000 94,050 - - - -
Chief Executive 1992 298,707 - - - - -
Officer
Mark A. Searles, 1994 $118,975(d) $ 7,605 $ 7,605 - 250,000 -
President and
Chief Operating
Officer
David H. Eargle, 1994 $172,627(d) $12,107 $14,164 - - $9,424
Executive Vice 1993 173,068 37,724 12,108 $12,825 7,500 8,994
President 1992 160,734 25,469 15,392 - 50,000 8,728
Bradley K. Alford, 1994 $125,003 - - - -
Senior Vice 1993 87,737 $61,300 - $40,325 17,500 -
President (e)
R. Cris Sherman, 1994 $ 84,480 $23,650 $ 1,352 - -
Vice President 1993 81,280 31,900 $ 5,130 10,000 -
and Chief -
Financial
Officer (e)
</TABLE>
- - --------------------
(a) The "bonus" amounts attributable to the fiscal years 1992, 1993 and 1994
(until October 1, 1994) represent cash and bonus stock awarded pursuant to
the Company's 1992 Stock Bonus Plan on a discretionary basis as determined
by the Compensation Committee and in recognition of the executive's role in
completing certain corporate objectives and attainment of personal and
Company performance standards. Mr. Sherman's bonus in 1994 includes amounts
paid under these discretionary arrangements. [Additionally, the Compensation
Committee rewarded certain individuals for Company or business unit
performance which exceeded predetermined goals set by the Board of
Directors.] In lieu of this discretionary bonus system and in furtherance of
the Company's change to a variable "pay for performance" compensation
philosophy, the Company instituted an Incentive Compensation Plan (the
"Incentive Plan") on October 1, 1994, which is available to all Company
employees including its executive officers. The Incentive Plan is intended
to reward the participants when the Company's financial performance exceeds
certain threshold performance levels on an annual basis. Additionally, the
Incentive Plan includes provisions relating to specific business units under
which the Company's natural gas marketing and trading personnel may earn
bonuses relating to individual and commercial group performance on a
quarterly basis. Incentive Plan participants and performance thresholds are
established each year by the Compensation Committee based on recommendations
from management. Annual awards are contingent upon the Company's overall
financial performance and are funded through an incentive pool. Distribution
of awards are apportioned to each participation group (executive, commercial
or support) and are allocated between cash awards and performance shares on
a pre-determined basis. Performance shares distributable under the Incentive
Plan are phantom equity units which have economic equivalence to shares of
Common Stock and are intended to align the long-term interests of the
Company's
5
<PAGE>
employees with its stockholders. Performance thresholds are set by the
Compensation Committee based on a combination of factors including earnings
before interest, taxes, depreciation and amortization, net cash flow, volume
and customer growth, enhancement of gross margins and other similar factors.
Under the Incentive Plan, the following officers received cash bonuses and
performance shares, respectively set forth following their names: Mr.
Phillips, $7,605, $7,605; Mr. Searles, $7,605, $7,605; Mr. Eargle, $12,107,
$1,352; and Mr. Sherman, $3,650, $2,434. Cash bonuses are reflected in
Bonus. The dollar amounts of performance shares awarded are disclosed in
Other Annual Compensation. Performance shares (i) are issued in share
equivalents based upon the average high and low market prices for a share of
Common Stock during the 30 days immediately preceding the date of grant
(which was $2.855 per share for all performance shares awarded for the 1994
fiscal year), (ii) do not become vested until three years following the date
of grant (the "redemption date"), and (iii) are only redeemable in cash by
the Company at a share value based upon the average high and low market
prices for a share of Common Stock during the 30 days immediately preceding
the redemption date.
(b) Pursuant to the rules on executive and director compensation disclosure
adopted by the SEC, Other Annual Compensation is reportable if, in the
aggregate, the components thereof exceed the lesser of $50,000 or 10% of the
respective executive officer's salary and bonus. Further, each component
thereof that exceeds 25% of the total for each executive officer for whom
disclosure is required must be identified. Of the total benefits received
by Mr. Eargle, Other Annual Compensation includes $11,730, $12,108 and
$11,250 in 1994, 1993 and 1992, respectively, which relates to his car
allowance and All Other Compensation relates to $9,424, $8,994 and $8,728 in
1994, 1993 and 1992, respectively, of matching contributions by the Company
to its 401(k) Plan for Mr. Eargle's benefit.
(c) During 1994, no shares of stock were awarded pursuant to the Company's 1992
Stock Bonus Plan to any of the named executive officers.
(d) Messrs. Phillips and Searles are parties to employment agreements with the
Company which provide for minimum annual compensation of $300,000 and
$200,000, respectively. As a result of the implementation of and
participation in the Incentive Plan, Messrs. Phillips, Searles and Eargle
voluntarily reduced their annual base salaries by approximately $50,000 each
effective November 1, 1994.
(e) Messrs. Alford and Sherman did not become executive officers of the Company
until 1993; therefore, information for years ended prior to the date they
became executive officers is not required to be disclosed. Mr. Alford was
an executive officer of the Company at December 31, 1994; he resigned his
position effective January 20, 1995.
6
<PAGE>
OPTION GRANTS
The following table presents certain information concerning grants of stock
options made during 1994 to the executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ Potential Realizable
% of Value at Assumed
Number of Total Rates of Stock
Securities Options Price Appreciation
Underlying Granted to Exercise or For Option Term
Options/SARs Employees Base Price Expiration --------------------
Granted in 1994 ($/share) Date 5% 10%
--------------- ----------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Phillips(a) - - - - - -
Mark A. Searles 200,000(b) 71% $2.50 5/10/2004 314,000 796,000
50,000(c) 18% $2.50 5/11/2004 78,500 199,000
David H. Eargle - - - - - -
Bradley K. Alford - - - - - -
R. Cris Sherman - - - - - -
</TABLE>
- - --------------------
(a) Mr. Phillips is ineligible to participate in the Company's 1987 Employee
Stock Option Plan (the "1987 Option Plan") and the 1994 Executive Long-Term
Stock Option Plan (the "1994 Option Plan").
(b) Represents share purchase rights granted to Mr. Searles as an inducement to
enter into an employment agreement with the Company. The rights are
immediately exercisable and were issued with an exercise price equal to the
closing price of a share of Common Stock as reported by the NASDAQ for the
date of grant. The share purchase rights are more fully described in the
discussion of Mr. Searles' employment arrangements with the Company under
"-Employment Agreements."
(c) Represents options granted pursuant to the 1987 Option Plan on May 11, 1994,
having an exercise price equal to the closing price of a share of Common
Stock as reported by the NASDAQ for the date of grant. The options become
exercisable in two increments of 25,000 shares on each of the first and
second anniversaries of the date of grant, so long as employment with the
Company continues. Under the 1987 and 1994 Option Plans, the Compensation
Committee has the authority to cancel an outstanding option and grant a new
option to the optionee for the same number of shares at a lower exercise
price. If this should occur, the Company would receive less for the stock
and the employee more upon the sale. The Compensation Committee did not
cancel any options during 1994 and has no present intent of doing so in the
foreseeable future.
7
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding the exercise of
options during 1994 and options held as of December 31, 1994, by the executive
officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT OPTIONS/SARS AT
ACQUIRED DECEMBER 31, 1994 DECEMBER 31, 1994
ON VALUE ------------------------- -------------------------
NAME EXERCISED REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------- -------- ------------------------- -------------------------
(B)
<S> <C> <C> <C> <C>
Robert G. Phillips (a) - - 0 / 0 0 / 0
Mark A. Searles - - 200,000 / 50,000 0 / 0
David H. Eargle 25,000 $72,250 182,500 / 5,000 $231,300 / $0
Bradley K. Alford - - 11,833 / 0 0 / 0
R. Cris Sherman - - 4,832 / 68,168 0 / 0
</TABLE>
- - --------------------
(a) Mr. Phillips is ineligible to participate in the 1987 and 1994 Option
Plans.
(b) Based upon the closing price per share of Common Stock of $2.31 as reported
by the NASDAQ for December 31, 1994.
EMPLOYMENT AGREEMENTS
Robert G. Phillips. Effective January 1, 1995, the Company modified and
extended the employment arrangement originally entered into in July 1987 with
Robert G. Phillips, its Chief Executive Officer and Chairman of the Board. The
new employment agreement has an initial term ending on December 31, 1997, which
will automatically renew for successive two-year terms thereafter until either
party gives six months prior notice. The agreement will also terminate upon the
death, disability or termination for cause of Mr. Phillips. The new agreement
provides for annual base compensation of $300,000 per year (voluntarily reduced
by approximately $50,000, effective November 1, 1994 in conjunction with Mr.
Phillips' participation in the Incentive Plan), bonuses at the discretion of the
Compensation Committee, and participation by Mr. Phillips in the Company's
Incentive and Deferred Compensation Plans, as well as the Salary Continuation
Plan when such plan is made effective. Pursuant to the Deferred Compensation
Plan, Mr. Phillips was granted the right to receive additional deferred
compensation of $50,000 per year beginning January 1, 1995 until revoked by the
Compensation Committee. Mr. Phillips is not eligible to participate in any of
the Company's various Stock Option or Bonus Plans. Mr. Phillips receives all
standard employee benefits provided to other executive employees of the Company.
The Company has agreed to maintain in force and effect the insurance policies on
the life of Mr. Phillips in accordance with the terms of the Buy/Sell Agreement
between the Company and Mr. Phillips. See "Certain Relationships and Related
Transactions." The new agreement between Mr. Phillips and the Company also
provides, in the event that Mr. Phillips is terminated for cause, or Mr.
Phillips severs his employment (except in the case where his employment is
severed for good cause upon change of control, or after his removal from the
office of Chief Executive Officer or Director and Chairman of the Board, a
material reduction in his authority or responsibility, relocation of the
Company's headquarters or any other breach of agreement by the Company), for a
period of six months following termination, Mr. Phillips will not compete with
the Company in certain respects.
8
<PAGE>
Further, the Company has agreed to reimburse Mr. Phillips for initial membership
fees for a club membership, not to exceed $40,000.
In the event that Mr. Phillips ceases to be an employee of the Company by
reason of termination by the Company other than for cause within three years
following a "change in control," the Company has agreed to pay Mr. Phillips, in
cash within ten days of such termination, severance payments and benefits as
follows: (i) an amount equal to 299% of Mr. Phillips' base compensation, (ii)
an amount equal to any accrued but unpaid incentive compensation and bonus, and
(iii) other benefits under the agreement to the date of termination. Further, in
the event that the severance payments and other payments to be paid to Mr.
Phillips exceed the largest parachute payment permitted pursuant to Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code"), and such payment
does not exceed such limitation by 5% or more, the excess will be forfeited by
Mr. Phillips to the Company; however, if such severance payments and other
payments exceed the parachute payment limitation by 5% or more, the payments to
be made to Mr. Phillips will be increased by a "gross up" payment sufficient to
reimburse Mr. Phillips for any parachute payment excise tax liability which may
result from such severance and other payments. A "change of control" is deemed
to have occurred if (i) any person, other than Mr. Phillips or party designated
by or controlled by him, becomes a beneficial owner, directly or indirectly, of
securities of the Company representing more than 25% of the combined voting
power of the Company's then outstanding securities, (ii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent at least 66 2/3% of the total voting power of the
Company or such surviving entity immediately after the merger or consolidation,
or (iii) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for sale or disposition of all or substantially
of the Company's assets.
Mark A. Searles. The Company entered into an employment agreement with Mark
A. Searles, its President, effective May 11, 1994. The initial term of the
agreement ends on May 1, 1996 but automatically renews for annual periods on
each anniversary unless either party gives 10 days' prior notice. The Company
may terminate the agreement at any time for cause. The agreement provides for
an annual base compensation of $200,000 (which was voluntarily reduced by
approximately $50,000, effective November 1, 1994 in conjunction with Mr.
Searles' participation in the Incentive Plan) and an annual incentive
compensation bonus (which was also subsequently removed in conjunction with Mr.
Searles' participation in the Company's Incentive Plan). In the event Mr.
Searles is terminated by the Company other than for cause, the agreement
provides for severance payments to Mr. Searles equal to one year of base
compensation ($200,000). As an inducement to enter into the employment
agreement, the Company agreed to issue to Mr. Searles the right (the "Rights")
to purchase up to 200,000 shares of the Company's Common Stock at an exercise
price of $2.50 per share, which was the closing price of the Common Stock
reported by NASDAQ for the date of grant. The Rights are more fully described
below. Mr. Searles will also receive all standard employee benefits provided to
other executive employees of the Company. Mr. Searles will be restricted from
competing with the Company during the term of his employment and for a period of
6 months thereafter. The Company also entered into an incentive registration
rights agreement with Mr. Searles whereby he was given one opportunity to demand
registration of an offering or distribution relating to the shares acquired
pursuant to the Rights, as well as the opportunity to include such shares in any
public offering initiated by the Company or on behalf of another stockholder.
The registration rights are not effective until after May 31, 1996.
The Rights are immediately exercisable and terminate on May 10, 2004. The
exercise period will be reduced to 30 days following notice by the Company in
the event (i) the trading price of a share of Common Stock is at least $2.50 and
(ii) the Company, in compliance with Regulation G promulgated by the Federal
Reserve Board ("Regulation G"), is able to lend to Mr. Searles 100% of the
exercise price of the Rights. The exercise price is payable to the Company in
the form of cash or cashier's check at the time of purchase. The Rights are not
transferrable except under the laws of descent and distribution and are further
restricted by applicable federal and state securities laws. The number of
shares and the
9
<PAGE>
purchase price of the stock underlying the Rights are subject to adjustment in
the event of certain changes in the capital structure of the Company or
transactions involving the Company. The Company has committed, subject to
compliance with all applicable laws, rules and regulations (including, without
limitation, Regulation G) to lend to Mr. Searles up to $2.50 per share or a
maximum of $500,000 to enable Mr. Searles to purchase the shares (the "Purchase
Loan"). The Purchase Loan will be in the form of a five-year balloon note with
a varying rate of interest, payable monthly, at the lesser of the prime rate of
First Interstate Bank of Texas, N.A., as it may vary from time to time, or the
applicable maximum nonusurious rate. The Purchase Loan will be secured by the
shares acquired by Mr. Searles, but will otherwise be nonrecourse to Mr. Searles
or his other assets.
DIRECTOR COMPENSATION
Cash Compensation of Directors. Except for directors who are also officers of
the Company, each director receives an annual director's fee of $12,500 and an
additional fee of $500 for each committee meeting attended that is held on a day
other than the day of a meeting of the Board of Directors. The Company also
reimburses directors for travel and related expenses incurred in attending
meetings of the Board or its committees. Mr. Parsons served as director during
1994 pursuant to agreements between the Company and Resource Investors
Management Company Limited Partnership and its affiliates ("RIMCO") and
therefore was not entitled to cash compensation or stock options provided to
nonemployee directors.
Nonemployee Director Stock Option Plan. The Company's 1987 Nonemployee
Director Stock Option Plan (the "Nonemployee Director Plan") is intended as an
incentive to retain as independent directors of the Company persons of training,
experience and ability, to attract new directors whose services are considered
valuable, to encourage the sense of proprietorship of such persons in the
Company and to stimulate their active interest in the development and financial
success of the Company. Options issued pursuant to the Nonemployee Director
Plan are nonqualified options within the meaning of Section 83 of the Code. The
Nonemployee Director Plan provides for the granting of options to purchase not
more than 200,000 shares of Common Stock.
Under the Nonemployee Director Plan, each nonemployee director of the Company
is automatically granted an option on the date first elected or appointed a
Director of the Company and on each of the first four anniversaries thereof, as
long as such person is a Director on the date of each such grant. Each such
option is an option to purchase 10,000 shares of Common Stock. The purchase
price of each share subject to a stock option granted under the Nonemployee
Director Plan is the fair market value of such share on the date such option is
granted.
Options granted under the Nonemployee Director Plan will terminate upon the
earliest to occur of the following: (a) the expiration of ten years from the
date of the grant of the option; (b) one year after the optionee ceases to be a
director of the Company by reason of death or disability; or (c) three months
after the optionee ceases to be a director of the Company for any reason other
than death or disability. Options granted under the Nonemployee Director Plan
are not exercisable until the completion of one year of service as a director of
the Company following the date of the grant of the option. In the event of
cessation of services of a director of the Company for any reason other than
death or disability, options may be exercised only with respect to the number of
shares purchasable at the time of such cessation. In the event of cessation of
service because of death or disability, any unmatured installments of the option
shall be accelerated, effective as of the date of cessation of service. The
Board has authority to amend, alter or discontinue the Nonemployee Director
Plan, subject to certain exceptions.
Pursuant to the Nonemployee Director Plan, Mr. Haynes was granted options to
purchase 10,000 shares at an exercise price of $11.00 per share on June 30,
1987, 10,000 shares at an exercise price of
10
<PAGE>
$2.375 per share on June 30, 1988, 10,000 shares at an exercise price of $2.9375
per share on June 30, 1989, 10,000 shares at an exercise price of $1.375 per
share on June 30, 1990, and 10,000 shares at an exercise price of $1.19 per
share on June 30, 1991. Mr. Winfrey was granted options to purchase 10,000
shares at an exercise price of $1.875 per share on January 1, 1990, 10,000
shares at an exercise price of $0.75 per share on January 1, 1991, 10,000 shares
at an exercise price of $2.56 per share on January 1, 1992, 10,000 shares at an
exercise price of $5.125 per share on January 3, 1993 and 10,000 shares at an
exercise price of $4.50 per share on January 1, 1994. Mr. Athon was granted
options to purchase 10,000 shares at an exercise price of $5.8125 per share on
January 23, 1993, 10,000 shares at an exercise price of $4.50 per share on
January 23, 1994, and 10,000 shares at an exercise price of $2.375 per share on
January 23, 1995. No options granted under the Nonemployee Director Plan were
exercised by the directors in 1994.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 31, 1995, certain information
regarding the ownership of Common Stock (which is the only class of voting
securities of the Company) by (i) each director of the Company, (ii) the Chief
Executive Officer and each executive officer of the Company named in the Summary
Compensation Table, (iii) all directors and executive officers of the Company as
a group, and (iv) each person (or group within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934) known by the Company to beneficially own
more than 5% of the Common Stock.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS (A) OWNED (B) OF CLASS
- - ------------------------------------------- -------------- ---------
<S> <C> <C>
Robert G. Phillips......................... 2,393,000 37.9%
Mark A. Searles (c)........................ 258,940 4.0%
David H. Eargle (c)........................ 141,300 2.2%
R. Cris Sherman (c)........................ 6,742 *
Merrell A. Athon (d)....................... 21,000 *
James E. Haynes (d)........................ 60,000 *
James N. Winfrey (d)....................... 57,000 7.7%
RIMCO (e).................................. 487,500 *
Bradley K. Alford (f)...................... 25,333 *
All directors and executive officers
as a group (10 persons) (g)............. 2,996,999 44.0%
</TABLE>
- - --------------------
* Represents less than 1%.
(a) The address of Messrs. Phillips, Searles, Eargle, Sherman, Athon, Haynes and
Winfrey is First Interstate Bank Plaza, Suite 1100, 1000 Louisiana Street,
Houston, TX 77002. The address for RIMCO is 22 Waterville Road, Avon, CT
06001.
(b) Beneficial ownership includes shares which are outstanding and which such
person has the right to acquire ownership of within 60 days of March 31,
1995, upon the exercise of outstanding options or warrants or otherwise.
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(c) Includes 132,500 shares and 6,332 shares underlying options held by Messrs.
Eargle and Sherman, respectively. Mr. Searles' shares include rights to
purchase 200,000 shares of Common Stock at $2.50 per share issued to him as
an inducement to enter into employment with the Company. See "Executive
Compensation-Employment Agreements."
(d) Includes 20,000 shares, 50,000 shares and 50,000 shares underlying options
held by Messrs. Athon, Haynes and Winfrey, respectively.
(e) Includes an aggregate of 487,500 shares underlying warrants beneficially
owned by RIMCO, through its affiliated entities, RIMCO Partners, L.P., RIMCO
Partners, L.P. II and RIMCO/NYL L.P., which hold warrants to purchase
161,363 shares, 261,787 shares and 64,350 shares, respectively.
(f) Includes 11,833 shares underlying options held by Mr. Alford. These options
terminated on April 20, 1995. Mr. Alford served as Senior Vice President of
the Company as of December 31, 1994, but resigned his employment with the
Company effective as of January 20, 1995.
(g) Includes an aggregate of 498,997 shares underlying options held by directors
and executive officers of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On February 21, 1990, three limited partnerships (RIMCO Partners, L.P., RIMCO
Partners, L.P. II and RIMCO/NY L.P., collectively, the "Purchasers"), of which
RIMCO serves as Managing General Partner, purchased an aggregate of $5,000,000
of the Company's 12% Senior Secured Notes due February 15, 2000 (the "Notes")
and warrants, exercisable after February 21, 1992 and before the close of
business on February 21, 2000, to purchase an aggregate of 650,000 shares of the
Company's Common Stock at an exercise price of $2.00 per share. In July 1993,
the Purchasers exercised warrants to purchase 162,500 shares of Common Stock and
warrants to purchase 487,500 shares of Common Stock remain exercisable at
December 31, 1994. The Company also agreed in the Note Purchase Agreement that
so long as any of the Notes are outstanding, a designated representative of the
Purchasers will be nominated to the Company's Board and that the Company will
support and promote such representative's election to the Board of Directors. If
such a representative is not elected to the Board of Directors, the Company has
agreed to permit a representative of the Purchasers to attend all meetings of
the Company's Board of Directors and receive all materials distributed to the
members of the Company's Board of Directors so long as the Notes are
outstanding.
On April 22, 1993, the Company issued $4.5 million of Increasing Rate Secured
Notes (the "Increasing Rate Notes") to affiliates of RIMCO in connection with
the Heath Petra acquisition. The terms of the Increasing Rate Notes provided
for an interest rate of 9% per annum through November 1, 1993 and increased to a
rate of 12% per annum thereafter. The terms of the Increasing Rate Notes also
provide for equal annual repayments of principal each year beginning on May 1,
1995, until retired in full at maturity on May 1, 1999, and may be prepaid in
full at any time without penalty. In connection with the sale of the Increasing
Rate Notes, the Company issued warrants to purchase 160,000 shares of Common
Stock of the Company exercisable at $4.00 per share at any time after May 1,
1995, and before May 1, 2003; provided, however, that in the event the
Increasing Rate Notes have been repaid in full prior to May 1, 1995, the
warrants will expire and will not become exercisable by the holders. The
Company paid to RIMCO, for the benefit of its affiliates, interest during 1994
of $1,168,451 in connection with the Notes and the Increasing Rate Notes.
On November 1, 1987, the Company loaned Mr. Phillips $166,500 pursuant to an
unsecured note originally due November 1, 1992 and subsequently extended by the
Board to November 1, 1994. No payments are due on the note prior to maturity and
the note bears interest at the prime rate. During 1990 and 1991, Mr. Phillips
voluntarily reduced his annual compensation by $50,000 with the after-tax
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difference being applied as payments on the note. At December 31, 1994, the
outstanding principal balance on the note was $100,500 with accrued interest of
$78,153.
On May 23, 1990, the stockholders of the Company approved a proposal regarding
an insurance funded Buy-Sell Agreement between Mr. Phillips and the Company,
exercisable only in the event of the death of Mr. Phillips. The Company
believes that the Buy-Sell Agreement will enhance the Company's ability to
acquire Mr. Phillips' shares from his successors or estate (collectively the
"Estate"), thereby benefiting the remaining stockholders by increasing the
relative percentage of the Company owned by such remaining stockholders. Under
the terms of the Buy-Sell Agreement, the right of the Estate to sell shares to
the Company and the right of the Company to purchase shares from the Estate are
exercisable by the Estate and the Company, respectively, only to the extent of
the after-tax insurance proceeds actually received by the Company and only to
the extent that the Company has funds legally available for the repurchase of
its shares under applicable corporate law provisions. The exercise price under
the Buy-Sell Agreement is the greater of (i) $2.00 per share or (ii) 90 percent
of the average market price during a 120-day period beginning on the 60th day
following Mr. Phillips' death. If for any reason no insurance proceeds are paid
to the Company, the Company's obligation to purchase the shares will terminate.
The Buy-Sell Agreement terminates on January 9, 2001.
To fund its potential obligation and option under the Buy-Sell Agreement and
as a condition to entering into the Buy-Sell Agreement, the Company carries term
life insurance on Mr. Phillips. Further, the Company's employment agreement
with Mr. Phillips requires the Company to maintain sufficient insurance to fund
its obligations pursuant to the Buy-Sell Agreement. On April 8, 1995, the
Company renewed the annual term life insurance policy with a face value of $7
million from Texas Life Insurance Co. (a MetLife Company). The Board may
consider the conversion of the policy from term to whole life at a later date.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
EASTEX ENERGY INC.
/s/ R. Cris Sherman
------------------------------------------
R. Cris Sherman
Vice President and Chief Financial Officer
Date: April 28, 1995
