<PAGE> 1
SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
/x/ Preliminary Information Statement / / Confidential, for Use of
the Commission Only (as
permitted by Rule
14c-5(d)(2))
/ / Definitive Information Statement
Box Energy Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
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(2) Aggregate number of securities to which transactions applies:
N/A
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rules 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
(5) Total fee paid:
N/A
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
N/A
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(2) Form, Schedule or Registration Statement No.:
N/A
- --------------------------------------------------------------------------------
(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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<PAGE> 2
[BOX ENERGY CORP. LOGO]
September , 1996
Dear Box Energy Investor,
On August 20, I wrote to you regarding the recent changes that had occurred
at Box Energy Corporation. The attached notice and information statement
describe these changes in greater detail.
I would like to reaffirm the one over-arching goal of management and the
Board -- maximization of stockholder value. Consistent with this, the Company
has two operational objectives.
First, management intends to re-evaluate the Company's exploration and
production efforts. In particular, it is the Company's goal to be more selective
in its exploration activities. In furtherance of this, the Company has retained
a consultant to assist in hiring an exploration and production manager with a
proven track record.
Second, the Company's staffing and overhead will be closely reviewed on a
continuing basis with the goal of reducing the Company's general and
administrative costs. I have promised that my compensation will not exceed
one-half of the previous CEO's pay. Further, the Company is looking for less
expensive offices and a reduction of its litigation expenses.
I will continue to communicate to you how we are doing.
Sincerely,
Don D. Box,
Chairman of the Board,
Chief Executive Officer
and President
<PAGE> 3
BOX ENERGY CORPORATION
8201 PRESTON ROAD, SUITE 600
DALLAS, TEXAS 75225-6211
---------------------
NOTICE OF ACTION BY WRITTEN CONSENTS OF CERTAIN STOCKHOLDERS
EFFECTIVE JULY 30, 1996
---------------------
September , 1996
To the holders of the Class A (Voting)
Common Stock of
BOX ENERGY CORPORATION:
Effective July 30, 1996, the following actions were taken by written
consent of Box Brothers Holding Company, the holder of 56.6% of the outstanding
voting stock of Box Energy Corporation (the "Company"), and Basil Georges and
Pat Rutherford, Jr., the holders of 13.6% and 9.0%, respectively, of the
Company's outstanding voting stock:
1. The Bylaws of the Company were amended to permit the removal of
directors, with or without cause, by the vote of the holders of a majority
of the shares then entitled to vote in the election of directors.
2. The following directors of the Company were removed: John F.
Arning, Thomas D. Box, John L. Kelsey, Norman W. Smith and Ewell Doak
Walker.
3. The Bylaws of the Company were amended to fix the number of
directors of the Company at seven.
4. The following persons were elected to serve as directors of the
Company with Don D. Box and Alan C. Shapiro: Glen Adams, Bernay C. Box,
Daryl L. Buchanan, Thomas W. Rollins and Richard D. Squires.
UNDER SECTION 228 OF THE DELAWARE GENERAL CORPORATION LAW, THE FOREGOING
ACTIONS BY WRITTEN CONSENTS HAVE BEEN TAKEN WITHOUT THE NECESSITY OF A
STOCKHOLDERS' MEETING. ACCORDINGLY, WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
By order of the Board of Directors
Don D. Box,
Chairman of the Board, Chief
Executive Officer and President
Dallas, Texas
<PAGE> 4
BOX ENERGY CORPORATION
8201 PRESTON ROAD, SUITE 600
DALLAS, TEXAS 75225-6211
---------------------
INFORMATION STATEMENT
---------------------
This Information Statement is being furnished to the holders of the Class A
(Voting) Common Stock of Box Energy Corporation, a Delaware corporation (the
"Company"), in connection with certain action that was taken by written consents
of Box Brothers Holding Company, a Delaware corporation ("Box Brothers"), as the
holder of 1,840,525 shares (56.6%) of the Company's Class A (Voting) Common
Stock, Basil Georges, holder of 442,500 shares (13.6%) of the Class A (Voting)
Common Stock, and Pat Rutherford, Jr., holder of 292,500 shares (9.0%) of the
Class A (Voting) Common Stock.
By means of this written consent, the following actions were taken
effective July 30, 1996:
1. The Bylaws of the Company were amended to permit the removal of
directors (the "Directors"), with or without cause, by the vote of the
holders of a majority of the shares then entitled to vote in the election
of Directors.
2. The following Directors of the Company were removed: John F.
Arning, Thomas D. Box, John L. Kelsey, Norman W. Smith and Ewell Doak
Walker.
3. The Bylaws of the Company were amended to fix the number of
Directors of the Company at seven.
4. The following persons were elected to serve as Directors of the
Company with Don D. Box and Alan C. Shapiro: Glen Adams, Bernay C. Box,
Daryl L. Buchanan, Thomas W. Rollins and Richard D. Squires.
UNDER SECTION 228 OF THE DELAWARE GENERAL CORPORATION LAW, THE FOREGOING
ACTIONS BY WRITTEN CONSENTS HAVE BEEN TAKEN WITHOUT THE NECESSITY OF A
STOCKHOLDERS' MEETING. ACCORDINGLY, WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
---------------------
THE DATE OF THIS INFORMATION STATEMENT IS SEPTEMBER , 1996.
<PAGE> 5
BACKGROUND
Box Brothers is the holder of 1,840,525 shares of the Class A (Voting)
Common Stock of the Company. These shares were held by Cloyce K. Box at the time
of his death on October 25, 1993. The shares were acquired by Box Brothers from
the Estate of Cloyce K. Box on February 17, 1994, as the result of the
enforcement of a security interest created by Cloyce K. Box prior to his death
to secure indebtedness owed to Box Brothers.
As a consequence of the entering of an adverse judgment against Box
Brothers in a lawsuit not related to the Company, on August 1, 1994, Box
Brothers filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code
with the Bankruptcy Court in Wilmington, Delaware. As part of the bankruptcy
proceedings, an action was brought by certain stockholders of the Company
seeking return of the Class A (Voting) Common Stock held by Box Brothers to the
Estate of Cloyce K. Box. This action was dismissed by the Bankruptcy Court with
prejudice. This dismissal was affirmed by the U.S. District Court for Delaware,
and the plaintiffs in that proceeding have appealed the judgment to the U.S.
Court of Appeals for the Third Circuit, where the appeal is currently pending.
In April 1995, the Box Brothers plan of reorganization was approved by the
Bankruptcy Court, and that entity's reorganization under the Bankruptcy Code was
completed. See "Litigation Involving Directors and Executive Officers -- The
Griffin Litigation."
In April 1995, Thomas D. Box filed a lawsuit in the Delaware Chancery Court
(Thomas D. Box v. Douglas D. Box and Box Brothers Holding Company, No. 14238)
alleging that he was the holder of the only outstanding voting stock of Box
Brothers and seeking confirmation of action taken by him by written consent in
removing and electing directors of Box Brothers. On February 18, 1996, the court
ruled that Box Brothers had no outstanding voting stock and that the directors
of Box Brothers were Don D. Box, Douglas D. Box, Gary D. Box and Thomas D. Box.
On February 23, 1996, Box Brothers issued equal numbers of shares of its voting
stock to three irrevocable trusts (the "Trusts") established by three sons of
Cloyce K. Box -- Don D. Box, Gary D. Box and Douglas D. Box. These three
individuals serve as trustees for each of the trusts, and they currently are the
only directors and executive officers of Box Brothers. In addition to the
investment in the Company by Box Brothers, Douglas D. Box holds 3,325 shares of
the Company's Class A (Voting) Common Stock. This case is currently on appeal to
the Delaware Supreme Court.
Effective December 12, 1995, the Company entered into Executive Severance
Agreements with 22 of its officers and executives and letter agreements
regarding severance matters with 29 other employees of the Company. These
agreements are collectively called the "Severance Agreements." See "Change in
Control Arrangements."
On June 13, 1996, Kent R. Hance, Sr. resigned from his position as a
Director of the Company.
Box Brothers delivered a letter dated June 17, 1996 to the Company's Board
of Directors requesting that the Board promptly (a) call the Company's 1996
Annual Meeting of Stockholders and (b) fix the number of Directors of the
Company at seven. Box Brothers also advised the Board that, at the 1996 Annual
Meeting, Box Brothers intended to nominate and elect as Directors the seven
persons who currently make up the Company's Board of Directors. See "Current
Directors."
The Board of Directors did not agree to set the Company's Annual Meeting on
the date requested, and instead set the meeting for a later date, indicating
that the Board would first undertake an analysis of the stock issuances in
connection with the conversion in April 1992 of the Company's business from a
limited partnership to the Company's corporate structure (the "Corporate
Conversion"). Accordingly, on June 27, 1996, Box Brothers, as holder of 56.6% of
the Company's voting stock, delivered to the Company a written
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consent (the "Box Brothers Consent") executed by Box Brothers pursuant to
Section 228 of the Delaware General Corporation Law that (i) amended the
Company's Bylaws to permit removal of Directors with or without cause, (ii)
removed John F. Arning, Thomas D. Box, John L. Kelsey, Norman W. Smith and Ewell
Doak Walker as Directors of the Company, (iii) amended the Bylaws to fix the
number of Directors at seven, and (iv) elected Glen Adams, Daryl L. Buchanan,
Richard D. Squires, Thomas W. Rollins and Bernay C. Box to serve as Directors of
the Company with Don D. Box and Alan C. Shapiro. Pursuant to the terms of the
Box Brothers Consent, these actions were effective July 30, 1996. Thomas D. Box
is the brother of Don D. Box, Gary D. Box and Douglas D. Box. Bernay C. Box is
their first cousin.
Also on June 27, 1996, Box Brothers filed an action in the Delaware
Chancery Court under Section 225 of the Delaware General Corporation Law against
the Company's former Directors (other than Don D. Box and Alan C. Shapiro) and
the Company as a nominal defendant seeking a determination that the Box Brothers
Consent was effective in accordance with its terms. At the end of July, Box
Brothers filed a motion with the Delaware court seeking a temporary restraining
order or a preliminary injunction declaring that the new Board was authorized to
act on behalf of the Company. The court denied this motion. The individual
defendants in the case filed answers alleging that Box Brothers might hold less
than a majority of the Company's voting stock and that the Company had been
conducting a study of this matter.
On July 22, 1996, additional consents were delivered to the Company's
registered office in Delaware. These consents were signed by Basil Georges and
Pat Rutherford, Jr., the holders of 13.6% and 9.0%, respectively, of the
Company's Class A (Voting) Common Stock. These consents adopted all of the
actions taken in the Box Brothers Consent and were also to be effective on July
30, 1996.
On July 26, 1996, Thomas D. Box, purporting to act on behalf of the
Company, entered into a trust agreement with Comerica Bank -- Texas, as trustee,
seeking to establish a trust for the purpose of funding the Company's
obligations under the Severance Agreements. On July 30 and 31, Thomas D. Box and
possibly certain of the Company's other officers caused $5.6 million of the
Company's cash and marketable securities to be deposited with Comerica
Bank -- Texas as the corpus of this "trust". The trust agreement states that,
upon a "change of control" (defined to include the change in Directors on July
30, 1996), the alleged trust becomes irrevocable. The Company's Board of
Directors and management have analyzed the facts surrounding the creation of
this alleged trust, and they are of the opinion that (a) because Thomas D. Box
and the other Company officers acted without authorization from the Board of
Directors, these officers lacked the authority to act on the Company's behalf in
this matter, and (b) because the Company has stated that it will honor the
Severance Agreements in circumstances where they apply and the Company has more
than adequate resources to pay these amounts, the arrangement with Comerica
Bank -- Texas is unnecessary and not in the Company's interests. The Company is
seeking to terminate or void the alleged trust with Comerica Bank -- Texas and
cause the Company's $5.6 million (less prior payments to former employees
entitled to benefits under the Severance Agreements) to be returned to it.
On July 30, 1996, the day on which the action described in all of the
consents became effective, three of the Directors of the Company -- John L.
Kelsey, Norman W. Smith and Ewell Doak Walker -- tendered their resignations.
Following the resignation of these three persons, Box Brothers stipulated to
release them as defendants in the action pending in the Delaware court. Also,
former Director John F. Arning signed a stipulation consenting to judgment in
favor of Box Brothers. The court has scheduled this case for trial on September
17-18, 1996.
On August 7, 1996, the newly constituted Board of Directors of the Company
met and unanimously voted to terminate effective immediately the employment of
Thomas D. Box, the Company's President and Chief
3
<PAGE> 7
Executive Officer, and Jill M. Killam, Vice President and Chief Financial
Officer. Don D. Box, the Company's Chairman of the Board, was elected to serve
in the additional roles of President and Chief Executive Officer.
On August 8, 1996, W. Jefferson Burnett, the Company's General Counsel and
Secretary, tendered a letter requesting severance from the Company upon terms
outlined in the letter. The Company and Mr. Burnett subsequently agreed to a
termination of his employment. Currently, he is being retained by the Company as
independent outside legal counsel during a brief transition period. See "Change
in Control Arrangements."
On May 2, 1996, the U.S. Court of Appeals for the Fifth Circuit ("Fifth
Circuit") issued its opinion in the Griffin, et al v. Box, et al. litigation
(the "Griffin Case") ordering a new trial and resolving certain other issues.
See "Litigation Involving Directors and Executive Officers -- The Griffin
Litigation." On June 20, 1996, the Board of Directors authorized the engagement
of an outside law firm to determine whether the issuance of shares of the
Company as part of the Corporate Conversion as Class B (Non-Voting) Common
Stock, rather than Class A (Voting) Common Stock, to certain holders was in
accordance with the Fifth Circuit's opinion in the Griffin Case. The law firm
engaged an independent accounting firm to assist in the examination, and, on
August 9, 1996, both firms issued a preliminary report (the "Report") to the
Board of Directors. While the Report does not constitute a legal opinion of the
outside law firm, based on the Report, management and the Board of Directors
have concluded that the Box Brothers Consent together with the written consents
executed by Messrs. Georges and Rutherford are effective in accordance with
their terms.
The Board of Directors will carefully consider the Report and other
information and seek the advice of the Company's counsel to determine whether
the issuance of certain shares of the Company's capital stock as Class B
(Non-Voting) Common Stock was in accordance with the Fifth Circuit's opinion in
the Griffin Case or otherwise legally appropriate and defensible, and the
Company will take whatever action, if any, that it deems proper in respect
thereof.
On August 16 and 21, 1996, Thomas D. Box filed two lawsuits, one in federal
court and the other in state court. In these cases, he asserts that he retains
an ownership interest in Box Brothers and that Don D. Box, Douglas D. Box, Gary
D. Box and the other defendants breached certain fiduciary duties and violated a
federal securities anti-fraud statute and rule. See "Litigation Involving
Directors and Executive Officers -- Thomas D. Box Lawsuits."
CURRENT DIRECTORS
The Board of Directors of the Company currently consists of seven persons.
Each Director holds office until his or her successor is elected and qualified
or until his earlier resignation or removal in accordance with the Certificate
of Incorporation and Bylaws of the Company.
Prior to the preparation and execution of the Box Brothers Consent in June
1996, Messrs. Adams, Bernay C. Box, Buchanan, Rollins and Squires agreed to
serve on the Company's Board of Directors at the request of Box Brothers. There
are no agreements regarding their continued service as Directors at this time.
Certain current and past Directors and officers are named as defendants in
a lawsuit related to the Griffin Case. In addition, all of the Directors who
served in 1995 have been named as defendants in a consolidated class action. See
"Litigation Involving Directors and Executive Officers."
4
<PAGE> 8
Certain information concerning each Director is set forth below.
Glen Adams has served as a Director since July 30, 1996. From 1990 until
August 15, 1996, Mr. Adams served as a Director, Chairman, President and Chief
Executive Officer of Southmark Corporation, a diversified company with interests
in real estate, oil and gas properties, insurance and other areas. He currently
serves as a director of U.S. Home Corporation and Zale Corporation. He is 57
years of age.
Bernay C. Box has served as a Director since July 30, 1996. He has served
as President of Bernay Box & Co., a private Dallas investment advisory firm,
since 1991. Bernay C. Box was the nephew of Cloyce K. Box and is the first
cousin of Don D. Box, Douglas D. Box, Gary D. Box and Thomas D. Box. He is 34
years of age.
Don D. Box has served as a Director of the Company since March 4, 1991, and
was elected Chairman of the Board of Directors on January 20, 1994. He has
served as President and Chief Executive Officer of the Company since August 7,
1996. From March 1, 1994, until January 31, 1995, he served as the Company's
Director of Corporate Development. He is a Director and a Vice President of Box
Brothers, and President of CKB & Associates, Inc. ("Associates"), CKB Petroleum,
Inc. ("Petroleum"), and certain other affiliates of Box Brothers. Box Brothers
is the parent corporation of Associates and Petroleum. Until April 15, 1992,
Associates was the corporate general partner of OKC Limited Partnership (the
"Predecessor Partnership") and in such capacity provided all employees who
rendered services to the Predecessor Partnership. He is the son of Cloyce K. Box
and the brother of Douglas D. Box, Gary D. Box and Thomas D. Box. He is a co-
executor of the Estate of Cloyce K. Box and is 45 years of age.
Daryl L. Buchanan has served as a Director since July 30, 1996. Since
January 1986, he has served as Executive Vice President of Georges Investment
Company, a Houston and Dallas diversified investment firm controlled by Basil
Georges, holder of 13.6% of the Company's Class A (Voting) Common Stock. Mr.
Buchanan is 46 years of age.
Thomas W. Rollins has served as a Director since July 30, 1996. Since 1992,
Mr. Rollins has been Chief Executive Officer of Rollins Resources, a natural gas
and oil consulting firm. From March 1991 until 1992, Mr. Rollins was President
and Chief Executive Officer of Park Avenue Exploration Corporation, an oil and
gas exploration company and a subsidiary of USF&G Corporation. He is a director
of Pheasant Ridge Winery, The Teaching Company, and the Nature Conservancy of
Texas. Mr. Rollins is 65 years of age.
Alan C. Shapiro has served as a Director since May 5, 1994. From 1993
through the present, Professor Shapiro has served as Chairman of the Department
of Finance and Business Economics in the Graduate School of Business
Administration of the University of Southern California. Since 1984, Professor
Shapiro has been a Professor of Finance and Business Economics at the University
of Southern California's Graduate School of Business. From 1991 to present,
Professor Shapiro has been the Ivadelle and Theodore Johnson Professor of
Banking and Finance at the school. In addition, Professor Shapiro has also
taught at the Wharton School of the University of Pennsylvania and at Carnegie
Mellon University. His visiting teaching appointments have included Yale
University and the University of California at Los Angeles. Professor Shapiro is
51 years of age.
Richard D. Squires has served as a Director since July 30, 1996. Since
1988, Mr. Squires has served as President of RS Holdings, Inc., a Dallas real
estate and high-yield securities investment firm. He is 38 years of age.
5
<PAGE> 9
The Directors held six meetings in 1995. All Directors attended at least
75% of these meetings. With respect to Director activities undertaken by a
committee of Directors in 1995, a quorum of committee members were present at
each of the respective committee meetings.
COMMITTEES OF THE BOARD
There are three standing committees of the Board of Directors: the Audit,
Executive and Compensation Committees. The Company's Board of Directors does not
have a Nominating Committee. The Compensation Committee and the Audit Committee
each met four times in 1995. The Executive Committee did not meet in 1995.
During 1995, the members of the Audit Committee were John L. Kelsey, Alan
C. Shapiro, and Norman W. Smith. The Audit Committee reviews the performance of
the Company's independent auditors and recommends the selection of independent
auditors to the Board of Directors. In addition, the Audit Committee also
reviews the following matters with the independent auditors and management:
scope and results of the independent audit; corporate accounting policies;
adequacy and appropriateness of financial reporting to stockholders and others;
internal accounting control procedures; and such other related matters as the
Audit Committee considers to be appropriate. On August 7, 1996, the Board of
Directors appointed Glen Adams, Bernay C. Box and Alan C. Shapiro to the Audit
Committee.
During 1995, the members of the Executive Committee were John F. Arning,
Don D. Box, Thomas D. Box, Kent R. Hance, Sr., Norman W. Smith, and Ewell Doak
Walker. The Executive Committee possesses authority to exercise all of the
powers of the Board of Directors in the management and direction of the affairs
of the Company between meetings of the Board of Directors, subject to specific
limitations and directions of the Board of Directors and subject to limitations
of Delaware law. On August 7, 1996, the Board appointed Don D. Box, Daryl L.
Buchanan, Thomas W. Rollins and Richard D. Squires to the Executive Committee.
During 1995, the members of the Compensation Committee were Kent R. Hance,
Sr., John L. Kelsey, Alan C. Shapiro, and Norman W. Smith. The Compensation
Committee's authority extends to matters relating to the retention and
compensation of executive officers, review of pension and benefit plans, and the
granting of stock options. The Compensation Committee also reviews and
recommends executive officers' compensation and reviews the performance of these
officers. Further, the Compensation Committee reviews all compensation levels
throughout the Company. Its pension plan responsibilities include the approval
of annual contributions, the approval of trustees and investment managers, and
the approval of pension trust agreements and other plan instruments. Although
the trustees and investment managers have primary investment responsibility with
respect to these funds, the Compensation Committee reviews their performance. On
August 7, 1996, the Board of Directors appointed Daryl L. Buchanan, Alan C.
Shapiro and Richard D. Squires to be the members of the Compensation Committee.
COMPENSATION OF DIRECTORS
Each outside Director is paid a fee of $16,000 per annum. In addition, each
Director receives $1,000 for each Board meeting attended and $750 for each
committee meeting attended if the committee meeting is on a different day than
the Board meeting. Directors are entitled to reimbursement for out-of-pocket
expenses related to their services. The Company's Bylaws provide for the
Company's indemnification of Directors and
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<PAGE> 10
officers in certain situations. The Company also provides the Directors with
directors' and officers' liability insurance.
The Company's Board of Directors approved the 1992 Non-Qualified Stock
Option Plan (the "Non-Qualified Plan") on April 24, 1992, for Company Directors,
including Directors who are full-time employees of the Company. The
Non-Qualified Plan was approved by the holders of the Class A (Voting) Common
Stock on July 1, 1992, effective as of April 24, 1992. The Non-Qualified Plan
terminates on April 23, 2002. The primary purposes of the Non-Qualified Plan is
to provide the Directors with an opportunity for investment in the Company's
Class B (Non-Voting) Common Stock and an incentive to remain in their capacity
as Directors and to continue to increase their efforts to make the Company
successful. The Non-Qualified Plan is administered by the Compensation
Committee. On April 28, 1992, the Stock Options Committee (now the Compensation
Committee) granted each person then serving as Director, the option to purchase
25,000 shares of the Company's Class B (Non-Voting) Common Stock under the
Non-Qualified Plan with an exercise price of $11.875 per share. On August 18,
1994, former Director John L. Kelsey was granted options for 25,000 shares with
an exercise price of $9.00 per share. On May 4, 1995, Alan C. Shapiro was
granted options for 25,000 shares with an exercise price of $8.625 per share.
Terms of the Non-Qualified Plan include the following:
a. More than one grant may be made to an individual, but options for
no more than 50,000 shares may be granted to any individual under the
Non-Qualified Plan.
b. The option price shall be equal to the fair market value of a share
of the Company's Class B (Non-Voting) Common Stock on the date of the
grant, determined by reference to the stock's closing price on the NASDAQ
National Market in the manner provided in the plan.
c. Options may only be exercised by the optionee by written notice
stating the number of shares covered by options being exercised. The shares
purchased through the exercise of options are to be paid for in cash or a
combination of cash and payments under an installment note payable to the
Company monthly plus interest over a period of up to five years. No options
can be exercised in the first three years after the date of grant; options
can be exercised for no more than 50% of the optioned shares after the
third year but before the fifth year after the date of grant; and the
remaining 50% of the optioned shares may be exercised no sooner than five
years after the date of grant.
d. All options terminate upon a termination of an optionee's service
as a Director of the Company, other than as a result of his death; however,
options granted under the Non-Qualified Plan to Thomas D. Box may have
become fully vested and exercisable at the time of his termination. See
"Change of Control Arrangements." Options may not be transferred by an
optionee except by will or the laws of descent and distribution.
e. The number of shares of the Company's Class B (Non-Voting) Common
Stock covered by options granted to any individual under the Non-Qualified
Plan and the option prices are subject to certain antidilution adjustments.
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<PAGE> 11
PENSION PLAN
The following table illustrates the annual pension benefit for pension plan
participants who retire at "normal retirement age" in 1995:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE(1)(3)(4)
COMPENSATION(1)(2) ------------------------------------
- ------------------ 10 20 30 40
($) ------ ------ ------ ------
($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
75,000........................................... 29,448 32,646 35,844 37,443
100,000........................................... 39,823 44,646 49,469 51,881
125,000........................................... 50,198 56,646 63,094 66,318
150,000........................................... 60,573 68,646 76,719 80,756
175,000........................................... 60,573 68,646 76,719 80,756
200,000........................................... 60,573 68,646 76,719 80,756
300,000........................................... 60,573 68,646 76,719 80,756
400,000........................................... 60,673 68,646 76,719 80,756
500,000........................................... 60,673 68,646 76,719 80,756
</TABLE>
- ---------------
(1) As of December 31, 1995, the Internal Revenue Code does not allow qualified
plan compensation to exceed $150,000 or the benefit payable annually to
exceed $120,000. These limitations will be adjusted by the Internal Revenue
Service for inflation in future years. When the limitations are raised, the
compensation considered, and the benefits payable under the Retirement Plan
will increase to the level of the new limitations or the amount otherwise
payable under the Retirement Plan, whichever amount is lower.
(2) Compensation in this table is the sum of a participant's annual base salary
plus annual bonus paid or payable for a fiscal year (see "Salary" and
"Bonus" columns in the Summary Compensation table). Average compensation in
this table is the average of a plan participant's compensation during the
highest three consecutive years out of the prior 10 years.
(3) The estimated credited service at December 31, 1995 for the Named Executive
Officers (as defined below) is as follows: Thomas D. Box (12 years), Don D.
Box (1 year), Craig T. Scott (4 years), Dennis A. Francis (14 years), Jill
M. Killam (15 years) and W. Jefferson Burnett (7 years).
(4) The normal form of payment is a life annuity for an unmarried participant or
a 50% joint and survivor annuity for a married participant.
The Company's pension plan provides retirement and other benefits to
eligible employees upon reaching the "normal retirement age," which is age 65 or
after five years of service, if later. Directors who are not also employees of
the Company are not eligible to participate in the plan. Employees are eligible
to participate on January 1 following the completion of six months of service or
the attainment of age 20 1/2, if later. Additional provisions are made for early
or late retirement, disability retirement and benefits to surviving spouses.
At normal retirement age, an eligible employee will receive a monthly
retirement income equal to 35% of his or her average monthly compensation during
the three consecutive calendar years in the prior 10 years which provide the
highest average compensation, plus 0.65% of such average compensation in excess
of the amount shown in the Social Security Covered Compensation Table (as
published annually by the Internal Revenue Service) multiplied by his or her
years of service, limited to 35 years. If an employee terminates
8
<PAGE> 12
employment (other than by death or disability) before completion of five years
of service, no benefits are payable. If an employee terminates employment after
five years of service, the employee is entitled to all accrued benefits.
As stated above, the compensation considered in computing benefits under
the Company's pension plan includes the participant's average monthly
compensation during the three consecutive calendar years which provide the
highest average compensation. The estimated annual benefits as of December 31,
1995, payable upon retirement at "normal retirement age" under the plan to
Thomas D. Box, Don D. Box, Craig T. Scott, Dennis A. Francis and Jill M. Killam
were $73,182, $73,816, $64,022, $71,996 and $71,709, respectively, (assuming
continuous employment to "normal retirement age"). The employment of Thomas D.
Box and Jill M. Killam terminated August 7, 1996.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of August 26, 1996, the following persons held shares of the Company's
Class A (Voting) Common Stock in amounts totaling more than 5% of the 3,250,110
shares of such class outstanding. This information was furnished to the Company
by such persons or contained in statements filed with the U.S. Securities and
Exchange Commission ("SEC").
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF
CLASS A (VOTING) CLASS A
NAME AND ADDRESS COMMON STOCK (VOTING)
OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK
--------------------------------------------- ------------------- --------------
<S> <C> <C>
Box Brothers Holding Company
1105 North Market, Suite 1300
Wilmington, Delaware 19801................. 1,843,850(1) 56.7%
Basil Georges
200 Crescent Court, Suite 1800
Dallas, Texas 75201........................ 442,500(2) 13.6%
Pat Rutherford, Jr.
2550 Two Shell Plaza
Houston, Texas 77002....................... 292,500 9.0%
</TABLE>
- ---------------
(1) This amount includes (a) 1,840,525 shares owned by Box Brothers, whose
voting stock is owned and controlled by trusts established for and
administered by Don D. Box, Gary D. Box and Douglas D. Box, and (b) 3,325
shares owned individually by Douglas D. Box. As the only holders of the
voting stock of Box Brothers, the Trusts and their trustees, Don D. Box,
Douglas D. Box and Gary D. Box, may be deemed the beneficial owners of the
1,840,525 shares of the Company's Class A (Voting) Common Stock under SEC
Rule 13d-3(d)(3). Also, Box Brothers, the Trusts and the three trustees may
be deemed a "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934.
(2) This amount includes 2,500 shares held by Mr. Georges as trustee of a trust
established for the benefit of his children.
9
<PAGE> 13
OWNERSHIP OF MANAGEMENT
The number of shares of the Company's Class A (Voting) Common Stock and
Class B (Non-Voting) Common Stock beneficially owned as of August 26, 1996 by
Directors (current and those in office in 1995) of the Company, each Named
Executive Officer (defined below) and as a group composed of all Directors and
executive officers, are set forth in the following table. This information was
furnished to the Company by such persons.
<TABLE>
<CAPTION>
SHARES OF
SHARES OF CLASS B PERCENT OF
CLASS A (VOTING) PERCENT OF (NON-VOTING) CLASS B
COMMON STOCK CLASS A COMMON STOCK (NON-VOTING)
BENEFICIALLY (VOTING) BENEFICIALLY COMMON
OWNED COMMON STOCK OWNED (1) STOCK(1)
---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Glen Adams........................ 0 0 0 0
John F. Arning.................... 700 * 1,000 *
Bernay C. Box..................... 0 0 0 0
Don D. Box (2).................... 1,840,525 56.6% 307,143 1.7%
Thomas D. Box..................... 3,325 * 2,000 *
Daryl L. Buchanan (3)............. 0 0 12,000 *
W. Jefferson Burnett (4).......... 0 0 15,000 *
Dennis A. Francis(5).............. 0 0 5,000 0
Kent R. Hance, Sr................. 0 0 5,000 *
John L. Kelsey.................... 0 0 8,000 *
Jill M. Killam.................... 1,000 * 0 0
Thomas W. Rollins................. 0 0 2,000 *
Craig T. Scott(5)................. 0 0 5,000 0
Alan C. Shapiro................... 0 0 0 0
Norman W. Smith................... 1,000 * 0 0
Richard D. Squires................ 500 * 1,000 *
Ewell Doak Walker................. 0 0 0 0
All 1995 Directors and executive
officers as a group (21
persons)........................ 1,849,050 56.9% 363,643 2.1%
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of this class.
(1) The number of shares of Class B (Non-Voting) Common Stock owned by each
Director excludes stock options not exercisable within 60 days for the
purchase of 25,000 shares of Class B (Non-Voting) Common Stock by each of
Don D. Box and Alan C. Shapiro. The numbers of shares of Class B
(Non-Voting) Common Stock owned by Thomas D. Box, Craig T. Scott, Dennis A.
Francis and Jill M. Killam do not include their stock options to purchase
70,000, 30,000, 30,000 and 30,000 shares, respectively, of Class B
(Non-Voting) Common Stock. The total shares of Class B (Non-Voting) Common
Stock owned by Directors and by executive officers as a group also does not
include stock options not exercisable within 60 days to purchase 235,000
shares, in the aggregate. Certain of the options held by Thomas D. Box and
Jill M. Killam may have become immediately exercisable. See "Change in
Control Arrangements."
(2) The number of shares of both Class A (Voting) Common Stock and Class B
(Non-Voting) Common Stock shown as being beneficially owned by Don D. Box
includes 1,840,525 shares of Class A (Voting) Common Stock and 88,668 shares
of Class B (Non-Voting) Common Stock held by Box Brothers, and 205,975
shares of the Class B (Non-Voting) Common Stock held by Associates. The
amount of Class B (Non-Voting) Common Stock shown as being beneficially
owned by Mr. Box also includes 12,500 currently exercisable stock options
held by him.
(3) The number of shares of Class B (Non-Voting) Common Stock shown as
beneficially owned by Mr. Buchanan includes 10,000 shares held by the
Georges Investment Company Profit Sharing Plan, of which he is one of three
trustees.
(4) Options held by W. Jefferson Burnett to acquire 15,000 shares of Class B
(Non-Voting) Common Stock became immediately exercisable upon his separation
from the Company. See "Change in Control Arrangements."
(5) Amounts of Class B (Non-Voting) Common Stock shown as beneficially owned
consist totally of currently exercisable stock options.
10
<PAGE> 14
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the compensation paid by the Company during
1993, 1994 and 1995 to the Company's Chief Executive Officer and its four most
highly compensated executive officers, other than the Chief Executive Officer,
whose total annual salary and bonus in 1995 exceeded $100,000 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- -------------------------- -------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
NAME AND SALARY BONUS SATION AWARD(S) SAR'S PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- -------------------------------------- ---- ------- ------ ------- ---------- ------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas D. Box......................... 1993 166,200 10,000 (2) 0 0 0 4,900(3)
Chief Executive Officer 1994 353,300 40,000 (2) 0 0 0 400(3)
and President(1) 1995 355,500 25,000 (2) 0 50,000 0 400(3)
Don D. Box............................ 1993 0 0 0 0 0 0 19,300(5)
Chairman of the Board and 1994 183,600 20,000 (2) 0 0 0 400(5)
Director of Corporate 1995 19,300 0 (2) 0 0 0 554,100(5)
Development(4)
Craig T. Scott........................ 1993 82,500 8,300 (2) 0 10,000 0 400(6)
Executive Vice President 1994 120,000 19,200 (2) 0 0 0 400(6)
1995 123,600 21,800 (2) 0 20,000 0 400(6)
Dennis A. Francis..................... 1993 97,600 8,300 (2) 0 0 0 11,400(7)
Senior Vice President/ 1994 120,000 19,200 (2) 0 0 0 400(7)
Operations 1995 123,600 21,700 (2) 0 20,000 0 400(7)
Jill M. Killam........................ 1993 95,000 8,300 (2) 0 0 0 12,100(9)
Vice President and 1994 120,000 19,200 (2) 0 0 0 400(9)
Chief Financial Officer(8) 1995 123,600 21,000 (2) 0 20,000 0 400(9)
W. Jefferson Burnett.................. 1993 70,000 6,300 (2) 0 0 0 400(11)
General Counsel and 1994 90,000 12,600 (2) 0 0 0 400(11)
Corporate Secretary(10) 1995 92,700 14,500 (2) 0 7,500 0 400(11)
</TABLE>
- ---------------
(1) Thomas D. Box was removed as Chief Executive Officer and President
effective August 7, 1996.
(2) This amount is not required as it is less than 10% of the total salary and
bonus for the year.
(3) For 1993, this amount includes $4,500 for Directors' fees and $400 for
group term life insurance premiums paid by the Company. For 1994 and 1995,
this amount is for group term life insurance premiums paid by the Company.
(4) Don D. Box was employed by the Company as Director of Corporate Development
from March 1, 1994, until January 31, 1995. Since then, he has remained
Chairman of the Board. On August 7, 1996, he also became President and
Chief Executive Officer of the Company.
(5) For 1993, this amount is for Director's fees. For 1994, this amount is for
group term life insurance premiums paid by the Company. For 1995, this
amount includes $463,500 as severance pay (equal to 24 months of salary),
$68,900 in other severance benefits such as art work, furniture and
forgiveness of indebtedness, and $21,700 for Director's fees.
(6) For the years 1993, 1994, and 1995, these amounts are for group term life
insurance premiums paid by the Company.
11
<PAGE> 15
(7) For 1993, this amount includes $11,000 for Directors' fees and $400 for
group term life insurance premiums paid by the Company. For 1994 and 1995,
this amount is for group term life insurance premiums paid by the Company.
(8) Jill M. Killam was removed as Vice President and Chief Financial Officer
effective August 7, 1996.
(9) For 1993, this amount includes $11,700 for Directors' fees and $400 for
group term life insurance premiums paid by the Company. For 1994 and 1995,
this amount is for group term life insurance premiums paid by the Company.
(10) W. Jefferson Burnett terminated his employment as General Counsel and
Secretary effective August 8, 1996.
(11) For 1993, 1994 and 1995, this amount is for group term life insurance
premiums paid by the Company.
Other than the severance agreements discussed below, no Named Executive
Officer has an employment contract with the Company. See "Change in Control
Arrangements."
EMPLOYEE STOCK OPTIONS
The Company's Board of Directors approved the 1992 Incentive Stock Option
Plan (the "Incentive Plan") on April 24, 1992, for full-time Company employees,
including Directors who are also full-time employees. The Incentive Plan was
approved by the holders of a majority of the Company's Class A (Voting) Common
Stock on July 1, 1992, effective as of April 24, 1992. The Incentive Plan
permits option grants to purchase the Company's Class B (Non-Voting) Common
Stock. The Incentive Plan terminates on April 23, 2002. The primary purposes of
the Incentive Plan are to provide an additional inducement for those employees
granted options to remain with the Company and to continue to increase their
efforts to make the Company successful. The Incentive Plan is administered by
those Directors serving on the Compensation Committee. During 1995, the
Compensation Committee has granted options to purchase a total of 328,800 shares
of Class B (Non-Voting) Common Stock under the Incentive Plan. No stock options
granted under the Incentive Plan were exercisable prior to April 28, 1995.
Terms of the Incentive Plan include the following:
a. More than one grant may be made to an employee, but options for no
more than 20,000 shares, in the aggregate, may be granted under the
Incentive Plan to any employee. In 1995, the Directors voted to amend the
Incentive Plan to allow the granting of options for an unlimited number of
shares, in the aggregate, to an employee, provided that options for no more
than 20,000 shares per year are granted to any individual employee, except
for the Chief Executive Officer, who would be limited to options for no
more than 50,000 shares per year. In order to become effective, this
amendment to the Incentive Plan will require the approval of the holders of
a majority of the Company's Class A (Voting) Common Stock. The current
Compensation Committee has not made a recommendation to the Board of
Directors as to whether this amendment should be submitted for stockholder
approval.
b. The option price is equal to the fair market value of a share of
Class B (Non-Voting) Common Stock on the date of the grant, except that the
option price for an employee owning more than 10% of the voting power of
the Company is equal to 110% of the fair market value of Class B
(Non-Voting) Common Stock on the date of grant.
c. Options may only be exercised by the optionee by written notice
stating the number of shares covered by options being exercised. The shares
purchased through the exercise of options are to be paid
12
<PAGE> 16
for in cash or a combination of cash and payments under an installment note
payable to the Company monthly plus interest over a period of up to five
years. No options can be exercised in the first three years after the date
of grant; options can be exercised for no more than 50% of the optioned
shares after the third year but before the fifth year after the date of
grant, and the remaining 50% of the optioned shares may be exercised no
sooner than five years after the date of grant; however, Severance
Agreements entered into by the Company with 22 officers and executives
state that all stock options fully vest upon the termination of employment
in certain instances following a "change in control." See "Change in
Control Arrangements."
d. All options terminate 10 years from the date of grant, except those
options granted to an individual who at the time of grant owns more than
10% of the voting power of any class of the Company's outstanding stock,
which terminate five years from the date of grant, or upon a termination of
an optionee's employment with the Company, other than an authorized
retirement or as a result of death or an acknowledged physical disability.
The options granted under the Incentive Plan may not be transferred by an
optionee except by will or the laws of descent and distribution.
e. As a condition to the grant of an option, the optionee is required
to execute a written agreement to remain in the employment of the Company
for one year, subject to termination at will by the Company.
f. The number of shares of Class B (Non-Voting) Common Stock covered
by options granted to any individual under the Incentive Plan and the
option prices are subject to certain anti-dilution adjustments.
13
<PAGE> 17
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- --------------------------------------------------------------------------------------------------- -------------------
(A) (B) (C) (D) (E) (F) (G)
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED
OPTIONS/ TO EXERCISE
SARS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR ($/SHARES) DATE 5%($) 10%($)
- ---------------------------------------------- ---------- --------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Thomas D. Box,................................ 50,000(2) 15.2% 9.625 11-30-01 77,100 223,300
Chief Executive Officer and President(1)
Don D. Box,................................... 0(4) N/A N/A N/A N/A N/A
Chairman of the Board and Director of
Corporate Development(3)
Craig T. Scott,............................... 20,000(5) 6.1% 8.75 11-30-06 110,100 278,900
Executive Vice President
Dennis A. Francis,............................ 20,000(5) 6.1% 8.75 11-30-06 110,100 278,900
Senior Vice President/Operations
Jill M. Killam,............................... 20,000(5) 6.1% 8.75 11-30-06 110,100 278,900
Vice President and Chief Financial
Officer(6)
W. Jefferson Burnett,......................... 7,500 2.3% 8.75 11-30-06 41,300 104,600
General Counsel and Corporate Secretary(7)
</TABLE>
- ---------------
(1) Thomas D. Box was removed as President and Chief Executive Officer effective
August 7, 1996.
(2) Options for 50,000 shares are contingent upon approval of an amendment to
the Incentive Plan by the holders of the Company's Class A (Voting) Common
Stock.
(3) Don D. Box's employment as Director of Corporate Development of the Company
ended as of January 31, 1995, but he continued as Chairman of the Board
after that date. Don D. Box was appointed President and Chief Executive
Officer of the Company August 7, 1996.
(4) Prior to 1995, Don D. Box was granted options for 25,000 shares for his
service as a Director under the Company's 1992 Non-Qualified Stock Option
Plan. He was not granted any options under the Incentive Plan.
(5) Options for 10,000 shares out of a total award of options for 20,000 shares
are contingent upon approval of an amendment to the Incentive Plan by the
holders of the Company's Class A (Voting) Common Stock.
(6) Jill M. Killam was removed as Vice President and Chief Financial Officer
effective August 7, 1996.
(7) W. Jefferson Burnett terminated his employment as General Counsel and
Secretary effective August 8, 1996.
14
<PAGE> 18
EXECUTIVE OFFICERS AND DIRECTORS IN 1995
The following table provides information with respect to persons who served
on the Company's Board of Directors or as an executive officer of the Company
during 1995. Each Director holds office until his successor is elected and
qualified or until his or her earlier resignation or removal in accordance with
the Certificate of Incorporation and Bylaws of the Company. Executive officers
hold their respective office at the pleasure of the Board of Directors. See
"Litigation Involving Directors and Officers."
<TABLE>
<CAPTION>
NAME AGE POSITION DURING 1995
- ------------------------- --- --------------------------------------------------
<S> <C> <C>
John F. Arning(1) 70 Director
Don D. Box(1) 45 Chairman of the Board of Directors
Thomas D. Box(1)(4) 40 Director, President and Chief Executive Officer
Kent R. Hance, Sr.(1)(3) 53 Director
John L. Kelsey(2)(3) 70 Director
Alan C. Shapiro(2)(3) 50 Director
Norman W. Smith(1)(2)(3) 53 Director
Ewell Doak Walker(1) 69 Director
Craig T. Scott 49 Executive Vice President
Dennis A. Francis 43 Senior Vice President/Operations
Jill M. Killam(5) 41 Vice President and Chief Financial Officer
W. Jefferson Burnett(6) 37 General Counsel and Secretary
Edward V. Howard 33 Vice President and Controller
M. Carlisle Barker 43 Vice President, Chief Accounting Officer and
Assistant Treasurer
Rodney A. Madden 40 Vice President/Marketing and Supply
Dorothy A. Knauf 75 Treasurer and Assistant Secretary
</TABLE>
- ---------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
(4) Thomas D. Box was removed as a Director effective July 30, 1996 and as
President and Chief Executive Officer effective August 7, 1996.
(5) Jill M. Killam was removed as Vice President and Chief Financial Officer
effective August 7, 1996.
(6) W. Jefferson Burnett terminated his employment as General Counsel and
Secretary effective August 8, 1996.
The following is a brief description of the background and principal
occupation of each executive officer of the Company during 1995 who is not
currently a Director. The periods of service shown below for officers of the
Company include service prior to the Corporate Conversion, as officers of
Associates which served as the corporate general partner of the Predecessor
Partnership.
Thomas D. Box served as President of the Company from July 1, 1993, and as
Chief Executive Officer and a Director from October 29, 1993. He was removed
from these positions effective July 30, and August 7, 1996. He was the Executive
Vice President of the Company from April 15, 1992 to July 1, 1993. He previously
served as Executive Assistant to the Chairman of Associates, as well as its Vice
President and Secretary. He has also served as a director and in various officer
positions in Box Brothers, Petroleum,
15
<PAGE> 19
Associates and other affiliates of Box Brothers. He no longer serves as an
officer of these entities, other than Box Brothers, although he remains a
director of these entities. He is the son of the late Cloyce K. Box and the
brother of Don D. Box, Douglas D. Box and Gary D. Box. He is a co-executor of
the Estate of Cloyce K. Box.
Craig T. Scott, an attorney and a Certified Public Accountant, has served
as Executive Vice President of the Company since July 1, 1993. Prior to joining
the Company in 1991, he served for three years as President of Sterling
Operating Company, a privately held corporation engaged in the exploration and
production of oil and gas and prior to that was engaged in the private practice
of law for ten years and public accounting for six years. Mr. Scott received a
Bachelor of Business Administration in Accounting and a law degree, both from
the University of Texas, and a Masters of Laws from Southern Methodist
University.
Dennis A. Francis has served as Senior Vice President/Operations of the
Company since 1989, and as Vice President from 1981 to 1989. He served as Vice
President of Petroleum from 1982 until November 1993. He attended Central State
University of Oklahoma.
Jill M. Killam, a Certified Public Accountant, served as Vice President and
Chief Financial Officer of the Company from March 1992, and as Vice President
and Chief Accounting Officer from 1989 to March 1992. Ms. Killam was removed as
Vice President and Chief Financial Officer effective August 7, 1996. From 1985
to 1989, Ms. Killam served as Assistant Treasurer. She served as Vice President
and Treasurer of Box Brothers and Vice President and Chief Financial Officer of
Associates, and certain other subsidiaries of Box Brothers Holding Company from
1989 until March 1996. She received a Bachelor of Business Administration in
Accounting from the University of Texas-Arlington.
W. Jefferson Burnett served as Corporate Secretary from July 1, 1993, and
General Counsel from December 15, 1993. Mr. Burnett terminated his employment in
these positions effective August 8, 1996. Prior to becoming General Counsel, he
had been Associate General Counsel for the Company since 1989. He received his
Bachelor of Arts from Knox College and his law degree from Texas Tech
University. Following law school, Mr. Burnett was a law clerk for an appellate
court in Texas. He then engaged in the private practice of law until he joined
the Company.
Edward V. Howard, a Certified Public Accountant, has served as Vice
President and Controller of the Company since March 1992, and a senior
accountant since 1989. From 1987 to 1989, Mr. Howard was employed as a ranch
manager with E.D. Howard and Sons, and from 1984 to 1987 he was a tax accountant
with KPMG Peat Marwick. Mr. Howard received a Bachelor of Business
Administration in Accounting from West Texas State University.
M. Carlisle Barker, a Certified Public Accountant, has served as Vice
President and Chief Accounting Officer of the Company since March 1992,
Assistant Treasurer since July 1, 1993, and a staff accountant from August 1991
to March 1992. He was the Trustee of the Constructive Trust imposed on
Petroleum. See "Litigation Involving Directors and Executive Officers -- The
Griffin Litigation." From 1988 to 1991, Mr. Barker served as Controller of Saxon
Exploration, Inc. Prior to that, he was employed as a senior accountant with
Bright and Company. He holds a Bachelor of Business Administration in Finance
from the University of Texas.
Rodney A. Madden has served as Vice President/Marketing and Supply of the
Company since 1989 and as a manager of marketing since 1982. Mr. Madden received
his Bachelor of Science in Business from Oklahoma State University.
Dorothy A. Knauf has served as Treasurer of the Company since 1981. She
served as Treasurer of Associates until March 1996.
16
<PAGE> 20
New Officer
J. Burke Asher, a Certified Public Accountant, was employed by the Company
on September 3, 1996 as a Vice President. Mr. Asher was an independent,
self-employed financial consultant and adviser from 1987 to 1996. He also served
as controller of Doty-Moore Tower Services, Inc., a privately held contractor to
the telecommunications industry, from 1993 to 1995. Mr. Asher received a
Bachelor of Science from the Wharton School of the University of Pennsylvania.
He is 55 years of age. On August 26, 1996, he held 950 shares of the Class A
(Voting) Common Stock and 376 shares of the Class B (Non-Voting) Common Stock of
the Company.
LITIGATION INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
The Griffin Litigation
The Griffin Case was filed in November 1987 in the U.S. District Court for
the Northern District of Texas in Dallas. The plaintiffs are a small group of
former unitholders of the Predecessor Partnership, including J.R. Simplot, a
former unitholder whose units of the Predecessor Partnership have since been
converted to approximately 15% of the Company's Class B (Non-Voting) Common
Stock. The defendants are Cloyce K. Box and Associates, who served as the
general partners of the Predecessor Partnership (the "General Partners"), the
Predecessor Partnership, and Box Brothers. The Estate was substituted in the
place of Cloyce K. Box in the litigation after his death in October 1993. As a
result of the Corporate Conversion, the Company will receive all benefits, and
will suffer all detriments, if any, of the Predecessor Partnership in the
litigation.
The plaintiffs made two types of claims in this case. First, plaintiffs
sought individual damages for alleged securities law violations and a
declaratory judgment regarding their voting rights. All of the plaintiffs'
claims for individual damages and voting rights were denied by the district
court at trial in October 1992.
Secondly, plaintiffs brought derivative claims on behalf of the Predecessor
Partnership alleging that the General Partners breached the limited partnership
agreement of the Predecessor Partnership ("the Partnership Agreement"), breached
fiduciary duties and violated an implied covenant of good faith and fair dealing
in relation to three transactions. The derivative defendants' motion that the
plaintiffs lacked standing on the derivative claims was rejected by the district
court. The first transaction was the 1985 purchase of an interest in an oil
pipeline by Petroleum. The second transaction involved the amount of general and
administrative expenses paid by the Predecessor Partnership prior to the
Corporate Conversion. The third transaction was a loan made by the Predecessor
Partnership to an unaffiliated individual.
The plaintiffs alleged actual damages of $20.0 million and punitive damages
of $60.0 million. In addition, plaintiffs alleged that the General Partners
engaged in racketeering activities in relation to the three transactions.
In October 1992, the jury returned a verdict on the derivative claims
finding that the General Partners did not breach the Partnership Agreement but
breached fiduciary duties and an implied covenant of good faith and fair dealing
arising from the Partnership Agreement. The jury awarded actual damages of
approximately $20.0 million and future damages of approximately $6.2 million in
favor of the Predecessor Partnership and against the General Partners relating
to the pipeline transaction. Minor damages were awarded on the general and
administrative expenses issue, while no damages were awarded based on the loan
transaction. In addition,
17
<PAGE> 21
the jury found no violation of the racketeering statutes. Punitive damages of
approximately $2.2 million were awarded against Cloyce K. Box.
In March 1994, the district court entered its initial judgment in favor of
the Company and against the Estate and Associates in the amount of $20.1 million
for past damages and against the Estate in the amount of $2.2 million for
punitive damages. In addition, the judgment imposed a constructive trust for the
benefit of the Company upon the pipeline interest owned by Petroleum, in lieu of
the $6.2 million in future damages included in the verdict. The judgment also
dismissed the plaintiffs' claims for individual damages and voting rights for
their Class B (Non-Voting) Common Stock.
In its amended final judgment issued in October 1994, the district court
added pre-judgment and post-judgment interest. In a separate order, the district
court granted the plaintiffs' motion for attorneys' fees and costs without
specifying the amount awarded. The plaintiffs seek $3.5 million in attorneys'
fees and costs.
Following trial, the plaintiffs filed a motion with the district court
challenging the foreclosure transaction in February 1994 in which Box Brothers
acquired all of the Class A (Voting) Common Stock of the Company formerly owned
by the Estate. The district court denied this motion without prejudice on the
basis that it had no jurisdiction to rule on the motion. Following this ruling
by the district court, the plaintiffs filed an adversary proceeding in the
bankruptcy case of Box Brothers then pending in Wilmington, Delaware. See
"-- Box Brothers Holding Company Bankruptcy." In February and March 1995, the
bankruptcy court dismissed the adversary proceeding with prejudice and held that
Box Brothers had no liability to the plaintiffs. In April 1995, the plan of
reorganization of Box Brothers was approved by the bankruptcy court. The
plaintiffs' appeal of the ruling in the adversary proceeding and the
confirmation order was denied by the U.S. District Court in February 1996, and
all three rulings in the case are currently on appeal to the U.S. Court of
Appeals for the Third Circuit.
The plaintiffs, the Estate, Associates and Petroleum all filed notices of
appeal in the Griffin Case to the Fifth Circuit. In its opinion in the Griffin
Case issued May 2, 1996, the Fifth Circuit (i) reversed the judgment and related
damages against the Estate and Associates, and remanded the case for a new trial
because of the jury's inconsistent answers to the liability issues; (ii) ruled
that the trial court's imposition of the constructive trust was improper; (iii)
affirmed the trial court's dismissal of the plaintiffs' individual claims for
monetary damages; (iv) ruled that one plaintiff, James Lyle, was an original
limited partner and remanded the case for a new trial to decide the number of
voting shares to which he is entitled; (v) remanded the case for further fact
findings to decide whether two other plaintiffs, Hayden McIlroy and B. R.
Griffin, were original limited partners and the amount, if any, of voting stock
to which they are entitled; (vi) affirmed the trial court's judgment that
plaintiffs J. R. Simplot and David Hawk were not entitled to voting stock; and
(vii) found that the trial court had erred in granting plaintiffs' attorneys'
fees. The plaintiffs have filed an appeal to the U.S. Supreme Court. The Company
cannot accurately predict when or how the Supreme Court will rule on this appeal
or how the issues might be decided if a new trial occurs.
In March 1995, the same plaintiffs as in the Griffin Case described above
filed an action against the Company, and Thomas D. Box, Don D. Box, Douglas D.
Box, Gary D. Box, John F. Arning, Dennis F. Francis, Phyllis George, Kent R.
Hance, Sr., Edward V. Howard, John L. Kelsey, Jill M. Killam, Nauman S. Scott,
III, Alan C. Shapiro, Norman W. Smith, Ewell Doak Walker and Richard S.
Whitesell, Jr. in the state district court in Dallas, Texas. In their action,
the plaintiffs allege that the defendants breached their fiduciary duty to the
Company in relation to the collection of the trial court judgment entered in
favor of the Company in the Griffin Case. The plaintiffs further allege
conflicts of interest among the Directors, misappropriation of corporate assets,
breaches of the duties of good faith and fair dealing, and wrongful payment of
certain
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attorneys' fees in the Griffin Case. These claims are apparently alleged both on
behalf of the plaintiffs as individuals and derivatively on behalf of the
Company. The damages sought exceed $50.0 million plus $100.0 million in punitive
damages against each defendant. The action has been abated pending resolution of
the underlying case on appeal to the U.S. Supreme Court. The defendants are
expected to defend the action vigorously. The Company anticipates that it will
be required to advance the defense costs of the defendants during the litigation
although the plaintiffs have requested that the court prohibit the advancement
of such defense costs. In addition, the Company may have indemnification
obligations to the defendants as a result of the lawsuit.
Devere and Nealon Cases
Two class actions, one styled Melissa Devere v. John F. Arning, Don D. Box,
Thomas D. Box, Kent R. Hance, Sr., John L. Kelsey, Alan C. Shapiro, Norman W.
Smith, Ewell Doak Walker and Box Energy Corporation, and the other styled Caren
M. Nealon and B. Peter Knudson v. John F. Arning, Don D. Box, Thomas D. Box,
Kent R. Hance, Sr., John L. Kelsey, Alan C. Shapiro, Norman W. Smith, Ewell Doak
Walker, Richard S. Whitesell, Jr. and Box Energy Corporation, were filed in the
Chancery Court of Delaware in Wilmington in April and May 1995, respectively. In
both cases the plaintiffs are holders of the Company's Class B (Non-Voting)
Common Stock. The defendants are the Company and the Directors named above,
except that Richard S. Whitesell, Jr., a former director, has been dismissed
from the cases. The actions allege that the Company failed to make a proper
response to offers or overtures previously made to purchase the Company's stock
by J.R. Simplot and Phoenix Canada Oil Co., Ltd. and has failed to solicit other
offers for the sale of the Company. In these cases the plaintiffs seek to compel
the Company to take certain steps intended to result in a sale of the Company
and unspecified amounts of damages, attorneys' fees and costs from the
individual defendants.
The Company intends to defend these suits vigorously. The cases have been
consolidated. All of the defendants have filed or joined a motion seeking to
dismiss the consolidated case. Further, the defendants have filed a motion to
stay discovery while the motion to dismiss is pending. The court has yet to set
a briefing schedule for either motion. The Company cannot predict when these
motions will be resolved or the outcome of these cases.
Box Brothers Holding Company Bankruptcy
In August 1994, Box Brothers filed for bankruptcy protection under Chapter
11 of the United States Bankruptcy Code in Delaware as a result of an adverse
judgment in a case not related to the Company. Box Brothers' Plan of
Reorganization was approved by the bankruptcy court in April 1995, thus allowing
Box Brothers Holding Company to emerge from bankruptcy. At the time of the
bankruptcy, Don D. Box, Douglas D. Box, Gary D. Box and Thomas D. Box were
directors of Box Brothers.
Thomas D. Box Lawsuits
On August 16, 1996, Thomas D. Box filed a lawsuit in the District Court for
Dallas County, Texas (Tom Box v. Gary Box, Don Box, Doug Box, Box Brothers
Holding Company, Inc. and CKB Petroleum, Inc. No. 9608451) alleging that the
defendants have breached fiduciary duties to Box Brothers and its subsidiary
Petroleum and wasted or converted their assets and asking the court for an
accounting, unspecified damages, costs and attorneys' fees and for the
appointment of a receiver for Box Brothers and Petroleum.
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On August 21, 1996, Thomas D. Box filed a second lawsuit in the U.S.
District Court for the Northern District of Texas (Tom Box V. Gary Box, Don Box
and Doug Box, Defendants and Box Brothers Holding Company, Inc. Nominal
Defendant No. 3-96CV2362-X) alleging, notwithstanding the decision of the
Delaware Chancery Court in 1996, that he remains the sole holder of voting stock
of Box Brothers, asserting that the defendants defrauded the plaintiff in
violation of the Securities Exchange Act of 1934 and the anti-fraud rules
adopted by the SEC under that statute and seeking unspecified actual and
exemplary damages, costs and attorneys' fees, rescission of the stock issuances
to the Trusts and a judicial declaration that the plaintiff has voting control
of Box Brothers.
Plaza Drive Associates, L.P. Bankruptcy
In July 1994, Plaza Drive Associates, L.P. ("Plaza"), a limited partnership
investing in high-yield securities with the sole general partner being a
corporation owned by Richard D. Squires and Mr. Squires being one of two limited
partners, filed a voluntary petition under Chapter 7 of the U.S. Bankruptcy Code
in the Bankruptcy Court in Dallas, Texas. Plaza's filing was in connection with
its efforts to enforce a deed of trust lien securing a promissory note held by
Plaza. After the filing, the collateral was liquidated, the promissory note was
collected, all of Plaza's creditors were paid in full, and Plaza received the
excess funds.
RELATED PARTY TRANSACTIONS
Box Brothers owns approximately 57% of outstanding shares of the Class A
(Voting) Common Stock of the Company and 94% of the outstanding shares of both
Petroleum and Associates. A resolution adopted in 1992 by the Board of Directors
of the Company authorizes the Company to enter into a transaction with an
affiliate of the Company so long as the Board of Directors determines that such
a transaction is fair and reasonable to the Company and is on terms no less
favorable to the Company than can be obtained from an unaffiliated party in an
arms' length transaction.
The Company pays oil transportation charges to Petroleum for transporting
crude oil from its South Pass blocks. Since March 1985, Petroleum has owned a
minority interest in the pipeline transporting oil from the wells in the South
Pass blocks to Venice, Louisiana. The tariff for the pipeline at $2.75 per
barrel was published and filed with the Federal Energy Regulatory Commission,
which regulates such rates. The rate has been uniform since 1982 among all
owners of the pipeline from South Pass Block 89 Field and is consistent with the
rate charged by an unaffiliated party to the Predecessor Partnership prior to
the acquisition of the pipeline interest by Petroleum. Petroleum billed the
Company $2.7 million, $2.2 million and $2.7 million for oil transportation
expense in 1995, 1994 and 1993, respectively. The amended judgment by the trial
court in the Griffin Case imposed a constructive trust upon this pipeline
interest in favor of the Company, but this decision later was reversed on appeal
to the Fifth Circuit. See "Litigation Involving Directors and Executive
Officers -- The Griffin Litigation."
During 1995, 1994 and 1993, the Company billed Petroleum and other related
parties, including the Estate of Cloyce K. Box (the "Estate"), Box Brothers and
certain of their affiliates, for the estimated fair value of usage of an
allocated portion of subleased office space, airplane usage (prior to the sale
of the Company's aircraft in 1994), certain payroll costs and benefits, and
other overhead costs. The amounts billed are considered to be the fair value of
such usage by, or allocations for the benefit of, the related parties. The
Company billed these related parties $134,000, $123,000 and $165,000 in 1995,
1994, and 1993, respectively, for items such as rent, aircraft use, payroll and
overhead costs.
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In March 1995, two of the Company's current Directors, seven of its former
Directors and several of its current officers were named as defendants in a
lawsuit filed in state district court in Dallas, Texas by the same plaintiffs as
in the Griffin Case. In addition, nine of the Company's current and former
Directors have been named as defendants in two class action lawsuits filed in
the Delaware Chancery Court in Wilmington. See "Litigation Involving Directors
and Executive Officers." In accordance with the Bylaws of the Company, the
defendants have executed written undertakings to repay the Company for any such
expenses advanced on their behalf if it is later found that such costs were not
subject to indemnification by the Company. Although the plaintiffs in the
Griffin Case have requested that the court prohibit the advancement of such
defense costs, the Company believes it has indemnification obligations to the
defendants as a result of the lawsuits. The total legal costs incurred in 1995
related to these cases were $583,000.
The trial court in the Griffin Case entered its amended final judgment in
October 1994 with respect to certain related party transactions on derivative
claims against the General Partners and in favor of the Company. Cloyce K. Box
passed away in October 1993. The Company has filed a claim against the Estate in
the Probate Court for Collin County, Texas seeking to recover the full amount of
the judgment, including certain attorneys' fees and costs as described below.
The Partnership Agreement provided that the General Partners were to be
indemnified for litigation expenses in certain situations in which they were
sued in their capacity as general partners of the Predecessor Partnership.
Accordingly, the Predecessor Partnership, and later the Company, paid the legal
expenses and other defense costs of the General Partners during a large portion
of the Griffin Case litigation. These payments were required under the
Partnership Agreement as a result of the General Partners' execution of written
undertakings to repay the Company for any such litigation expenses advanced on
their behalf if it was later determined that such advancements were not subject
to indemnification by the Company. The Company did not pay the legal expenses
and other defense costs of the General Partners after February 1994. After the
decision of the Fifth Circuit was handed down, the General Partners sought and
received reimbursement from the Company of these legal fees for the period March
1994 to April 1996 in the amount of $1.4 million.
In its claim in the Probate Court described above, the Company is seeking
to recover from the Estate an amount of attorneys' fees and costs equal to the
percentage of attorneys' fees and costs attributable to the defense of the
derivative claims as to be determined by the district court in connection with
the plaintiffs' request for attorneys' fees and costs. The Fifth Circuit
reversed the award of plaintiffs' attorneys' fees and costs. If these fees
should be reinstated by the U.S. Supreme Court or if another judgment is
obtained against the defendants in a new trial, it is doubtful that a
significant portion of the judgment, including attorneys' fees and costs, will
be recovered by the Company against the Estate because of the uncertainties
surrounding the value and the liquidity of the net assets of the Estate and
Associates and the amount of other claims pending against the Estate.
CHANGE IN CONTROL ARRANGEMENTS
The Company entered into Severance Agreements with its employees in
December 1995. The Severance Agreements require certain payments to employees
upon a termination of employment, in certain instances during a period of two
years after the change in control (as defined in the agreements). Terminations
providing severance benefits include terminations by the Company other than for
cause (as defined) or by the employee following certain enumerated acts by the
Company adversely affecting the employee's employment. A change in control is
defined in the Severance Agreements as the acquisition of 25% or more of the
combined voting power of the then outstanding Class A (Voting) Common Stock, the
cessation of membership of at least one-third of the eight member Board of
Directors of the Company on August 16, 1995, a merger,
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consolidation or reorganization of the Company, a plan of complete liquidation
or dissolution of the Company or an agreement to sell or otherwise dispose of
substantially all of the assets of the Company.
When the Box Brothers Consent and the other stockholder consents became
effective on July 30, 1996, a change of control occurred as the Company's new
Board of Directors included only two of the eight members of the Board of
Directors in office on August 16, 1995. See "Background."
In applicable situations, the Severance Agreements provide for cash
payments to former employees equal to the sum of: (1) all accrued, unpaid
compensation and a pro-rata bonus, (2) severance pay ranging from six to
eighteen months of the employee's base salary, and (3) an amount equal to the
actuarial present value, as of the date of termination, of three years'
hypothetical additional benefits under the Company's pension plan; provided,
however, the former employee retains all vested benefits under the Company's
pension plan and any other qualified pension or profit-sharing plans. In
addition, the Severance Agreements provide for the continuation of life,
disability, medical, dental and hospitalization insurance for six to eighteen
months and for the full vesting and lapsing of all restrictions on any stock
options granted to the employee. In light of the change of control that occurred
on July 30, 1996, the Severance Agreements will remain in effect with respect to
applicable terminations through July 30, 1998. The total estimated cost under
the Severance Agreements, if all Severance Agreements became effective, is $5.4
million. The Company has stated that it will honor the Severance Agreements in
circumstances where they apply.
On July 26, 1996, Thomas D. Box, purporting to act on behalf of the
Company, entered into a trust agreement with Comerica Bank -- Texas, as trustee,
seeking to establish a trust for the purpose of funding the Company's
obligations under the Severance Agreements. On July 30 and 31, Thomas D. Box and
possibly certain of the Company's other officers caused $5.6 million of the
Company's cash and marketable securities to be deposited with Comerica
Bank -- Texas as the corpus of this "trust". The trust agreement states that,
upon a "change of control" (defined to include the change in Directors on July
30, 1996), the alleged trust becomes irrevocable. The Company's Board of
Directors and management have analyzed the facts surrounding the creation of
this alleged trust, and they are of the opinion that (a) because Thomas D. Box
and the other Company officers acted without authorization from the Board of
Directors, these officers lacked the authority to act on the Company's behalf in
this matter, and (b) because the Company has stated that it will honor the
Severance Agreements in circumstances where they apply and the Company has more
than adequate resources to pay these amounts, the arrangement with Comerica
Bank -- Texas is unnecessary and not in the Company's interests. The Company is
seeking to terminate or void the alleged trust with Comerica Bank -- Texas and
cause the Company's $5.6 million (less prior payments to former employees
entitled to benefits under the Severance Agreements) to be returned to it.
Since July 30, 1996, three executive officers have left the Company. The
Company directed that $218,117 be paid from the alleged trust established in
July 1996 to W. Jefferson Burnett pursuant to his Severance Agreement with the
Company. This amount does not include any amounts to be paid by the Company with
respect to his options to acquire 15,000 shares of the Company's Class B
(Non-Voting) Common Stock. These options also vested when Mr. Burnett left the
Company, and, under the terms of the Severance Agreements signed by executives
such as Mr. Burnett, upon exercise of the options, the executive also has the
option of requiring the Company to purchase his shares at market value. The
Company estimates that the cost of continuing Mr. Burnett's health insurance
benefits for the required 18 months will be $13,546.
The Company has not yet determined if Thomas D. Box or Jill M. Killam are
entitled to any benefits pursuant to their Severance Agreements. If it is
determined that they are entitled to benefits, Mr. Box would receive
approximately $498,339 and Ms. Killam, approximately $280,512. The amounts do
not include
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amounts that might be payable with respect to options to acquire 70,000 shares
of Class B (Non-Voting) Common Stock in the case of Thomas D. Box and 30,000 of
these options held by Ms. Killam. Of Mr. Box's options for 70,000 shares and Ms.
Killam's options for 30,000 shares, grants to acquire 50,000 shares and 10,000
shares, respectively, are subject to stockholder approval. The Company's current
Compensation Committee has not recommended to the Board of Directors whether an
amendment to the Company's Incentive Plan permitting an employee to hold options
for more than 20,000 shares should be submitted to the holders of the Class A
(Voting) Common Stock for their approval. The cost of continuing health
insurance for 18 months is estimated to be $13,546 each for Thomas D. Box and
Ms. Killam.
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
The Company's 1996 annual meeting has been delayed. The Board of Directors
plans to call this meeting as soon as practicable. The Company anticipates that
the meeting will be held on or about November 26, 1996.
Stockholder proposals for inclusion in the proxy materials and
consideration at the Company's 1996 annual meeting must be received by the
Company before October 28, 1996 in order to be considered for inclusion in the
proxy materials of the Company for that meeting.
ANNUAL REPORT
The Company's 1995 Annual Report to Stockholders has previously been
submitted to stockholders. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1995, WILL BE SENT TO EACH PERSON TO WHOM AN INFORMATION STATEMENT
IS DELIVERED WITHOUT CHARGE BY FIRST CLASS MAIL OR EQUALLY PROMPT MEANS WITHIN
ONE BUSINESS DAY OF A WRITTEN REQUEST ADDRESSED TO DIRECTOR OF INVESTOR
RELATIONS, BOX ENERGY CORPORATION, 8201 PRESTON ROAD, SUITE 600, DALLAS, TEXAS
75225-6211, OR AN ORAL REQUEST DELIVERED BY TELEPHONE TO (214) 890-8000.
Exhibits to the Form 10-K will be furnished upon payment of the Company's
reasonable expenses in furnishing such exhibits.
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