<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
BOX ENERGY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
BOX ENERGY CORPORATION
November 6, 1997
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of
Stockholders of Box Energy Corporation. The meeting will be held
at the Hotel Inter-Continental Dallas (formerly the Grand
Kempinski Hotel), LeGala Room, 15201 Dallas Parkway, Dallas, Texas
75248, at 1:00 p.m. on Thursday, December 4, 1997.
The Notice of Meeting and Proxy Statement on the following
pages cover the formal requirements for the business of the
meeting. Whether or not you find it possible to attend the meeting
personally, we hope you will have your stock represented by
signing your proxy exactly as your name appears thereon and
returning it promptly.
Sincerely yours,
/s/ DAVID H. HAWK
David H. Hawk
Chairman of the Board
<PAGE> 3
BOX ENERGY CORPORATION
NOTICE OF ANNUAL MEETING THURSDAY, DECEMBER 4, 1997
1:00 P.M.
TO THE STOCKHOLDERS OF BOX ENERGY CORPORATION:
Notice is hereby given that the annual meeting of the holders of the Class
A (Voting) Common Stock of Box Energy Corporation, a Delaware corporation (the
"Company"), will be held at 1:00 p.m., Thursday, December 4, 1997, at the Hotel
Inter-Continental Dallas (formerly the Grand Kempinski Hotel), LeGala Room,
15201 Dallas Parkway, Dallas, Texas 75248, for the following purposes:
1. To elect a board of nine (9) directors.
2. To consider and vote upon the adoption of the 1997 Stock Option
Plan.
3. To consider and vote upon the adoption of the Non-Employee Director
Stock Purchase Plan.
4. To consider and vote upon an amendment to the Company's Certificate
of Incorporation to change the name of the Company to "Remington Oil and
Gas Corporation."
5. To transact such other business as may properly be brought before
the meeting or any adjournments or postponements thereof.
Only holders of the Company's Class A (Voting) Common Stock (the "Class A
Stock") of record at the close of business on October 23, 1997, are entitled to
notice of and to vote at the meeting or any adjournments or postponements
thereof. A complete list of the holders of the Class A Stock entitled to vote
will be available for examination by any holder of Class A Stock during normal
business hours at the Company's offices at 8201 Preston Road, Suite 600, Dallas,
Texas 75225-6211 for a period of ten business days prior to the date of the
Annual Meeting.
Holders of Class A Stock are invited to attend the meeting. Whether or not
you expect to attend, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. If you attend the meeting, you
may vote your shares in person, after revoking your proxy.
If your shares are held of record by a broker, bank or other nominee and
you wish to attend the meeting, you should obtain a letter from the broker, bank
or other nominee confirming your beneficial ownership of the shares and bring it
to the meeting. In order to vote your shares at the meeting, you must obtain
from the record holder a proxy issued in your name.
Regardless of how many shares you own, your vote is very important. Please
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ J. BURKE ASHER
J. Burke Asher,
Secretary
November 6, 1997
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY,
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING.
<PAGE> 4
BOX ENERGY CORPORATION
8201 PRESTON ROAD, SUITE 600
DALLAS, TEXAS 75225-6211
---------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 4, 1997
This Proxy Statement is being furnished to the holders of Class A (Voting)
Common Stock, par value $1.00 per share (the "Class A Stock"), of Box Energy
Corporation, a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Stockholders to be held on December 4, 1997 (the "Annual
Meeting"), and at any adjournments or postponements thereof. The Company was
initially organized in 1981 as OKC Limited Partnership (the "Predecessor
Partnership") and was converted to a corporation in 1992 (the "Corporate
Conversion"). Stockholders representing a majority of the Class A Stock
outstanding and entitled to vote must be present in person or represented by
proxy in order to constitute a quorum to conduct business at the meeting. The
Board of Directors has fixed the close of business on October 23, 1997, as the
record date for the determination of the Stockholders entitled to notice of and
to vote at the Annual Meeting. On the record date, 3,219,010 shares of Class A
Stock were outstanding and entitled to be voted at the meeting. Each share of
Class A Stock entitles the registered holder thereof to one vote on each matter
submitted to a vote at the meeting.
All shares of Class A Stock represented at the Annual Meeting by properly
executed proxies received prior to the meeting, unless the proxies have been
properly revoked prior to voting, will be voted in accordance with the
instructions on such proxies. If no instructions are given, proxies will be
voted in accordance with the recommendations of the Board of Directors, as noted
in this Proxy Statement. Any proxy given pursuant to this solicitation may be
revoked by the person giving it at any time before it is voted. Proxies may be
revoked by delivery to the Corporate Secretary of the Company at the Company's
principal executive offices at Box Energy Corporation, 8201 Preston Road, Suite
600, Dallas, Texas 75225-6211 of a written notice of revocation bearing a later
date than the proxy, or by duly executing and delivering to the Corporate
Secretary a subsequent proxy relating to the same shares, or by attending the
Annual Meeting and voting in person (although attendance at the Annual Meeting
will not in and of itself constitute revocation of a proxy).
With regard to all items submitted for Stockholder vote, abstentions are
not counted as voting for approval of a matter and, therefore, will have the
same effect as a vote "against" the matter, even though the Stockholder may
interpret such action differently. Votes withheld, including broker non-votes,
are neither counted as voting for nor against a matter and, therefore, as to
that matter will not be treated as shares present and will be disregarded.
Management knows of no matters to be presented for action at the Annual
Meeting other than those specified in this Proxy Statement and the accompanying
Notice of Annual Meeting. Should any other matter properly come before the
Annual Meeting, proxies will be voted upon these other matters in accordance
with the best judgment of the persons voting such proxies.
This Proxy Statement and the accompanying proxy are being first sent to
Stockholders on November 6, 1997.
<PAGE> 5
ELECTION OF DIRECTORS
Nine Directors of the Company are to be elected at the Annual Meeting to
serve until the next Annual Meeting and until their respective successors shall
have been elected and qualified. Unless authority to vote for one or more
Directors is withheld, proxies will be voted for the election of the persons
listed below or, if any such person shall unexpectedly become unable or
unwilling to accept nomination or election, for the election of such other
person as the Board of Directors may recommend. Directors will be elected by
holders of a plurality of the shares of Class A Stock present in person or
represented by proxy and entitled to vote. The persons listed below are
Directors of the Company now in office and are nominees for re-election. Mr.
Bernay C. Box, who is currently a Director, will not stand for re-election. The
Board of Directors recommends a vote "FOR" the nominees.
Certain information concerning each Director is set forth below.
Don D. Box has served as a Director of the Company since March 1991, and as
Executive Vice President of the Company since October 1997. He served as
Chairman of the Board of Directors from January 1994 to October 1997, as Chief
Executive Officer from August 1996 to October 1997, and as President from August
1996 to March 1997. From March 1994 to January 1995, he served as the Company's
Director of Corporate Development. He has served as Vice President of Box
Brothers Holding Company ("BBHC"), CKB & Associates, Inc. and CKB Petroleum,
Inc. since September 1997. For more than five years prior to September 1997 he
served as a director and executive officer of BBHC, CKB & Associates, Inc., CKB
Petroleum, Inc. and certain other affiliates of BBHC. BBHC is the prior name of
S-Sixteen Holding Company, which owns 57.2% of the Class A Stock and which is
the parent corporation of CKB & Associates, Inc. and CKB Petroleum, Inc. Until
April 15, 1992, CKB & Associates, Inc. was the corporate general partner of the
Predecessor Partnership and in such capacity provided all employees who rendered
services to the Predecessor Partnership. Mr. Box is a director of Toucan Mining
Company. He is a co-executor of the Cloyce K. Box Estate and is 47 years of age.
John E. Goble, Jr. has served as a Director since April 1997. Mr. Goble is
a certified public accountant and certified financial planner and from 1986
through the present has served as an investment and financial advisor to Byrd
Investments. Mr. Goble is a director of the Miracle of Pentecost Foundation. He
is 51 years of age.
William E. Greenwood has served as a Director since April 1997. From 1995
through the present, Mr. Greenwood has served as a consultant. He served as a
director and chief operating officer of Burlington Northern Railroad Corporation
from 1990 until 1994. Mr. Greenwood is a director of AmeriTruck Distribution
Corporation, Mark VII, Inc., and Transport Dynamics Inc. Mr. Greenwood is also
president of the Mendota Museum and Historical Society. He is 59 years of age.
David H. Hawk has served as a Director since September 1997 and as Chairman
of the Board since October 1997. Since 1984, he has served as Director, Energy
and Natural Resources for the J.R. Simplot Company in Boise, Idaho, which was
founded by J.R. Simplot, who, together with members of his family, controls
57.2% of the Company's Class A Stock. Mr. Hawk is 53 years of age.
James Arthur Lyle, CCIM, has served as a Director since September 1997.
Since 1976, he has been the owner of James Arthur Lyle & Associates, a
commercial, industrial, and investment real estate firm in El Paso, Texas. Since
1984, Mr. Lyle has served as a director, chief operating officer, and vice
president of Hueco Mountain Estates, Inc., a 10,500 acre multi-use real estate
development located in El Paso County, Texas. Mr. Lyle is 52 years of age.
2
<PAGE> 6
David E. Preng has served as a Director since April 1997. From 1980 through
the present, Mr. Preng has been Chief Executive Officer and President of Preng &
Associates, Inc., an international executive search firm. He is a director of
Citizens National Bank of Texas and The British American Business Association,
and is a Fellow of the Institute of Directors in London. He is 51 years of age.
Thomas W. Rollins has served as a Director since July 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 66 years of age.
Alan C. Shapiro has served as a Director since May 1994. From 1993 to June
1997, Professor Shapiro served as Chairman of the Department of Finance and
Business Economics in the Marshall School of Business 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
Marshall 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 52 years of age.
James A. Watt has served as a Director since September 1997 and as
President and Chief Operating Officer of the Company since March 1997. From
November 1993 to March 1997, he served as Vice President/Exploration of Seagull
Energy E&P, Inc., and from April 1991 to November 1993 he served as Vice
President/Exploration & Exploitation of Nerco Oil & Gas, Inc. He is 47 years of
age.
The Board of Directors held 11 meetings in 1996. Each Director attended at
least 75% of the total number of meetings of the Board of Directors and of the
Committees on which he served.
Certain current and past Directors and officers are named as defendants in
certain lawsuits. See "Litigation Involving Directors and Executive Officers."
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 met twice in 1996 and
the Audit Committee met three times in 1996. The Executive Committee did not
meet in 1996.
The members of the Audit Committee are Bernay C. Box and Alan C. Shapiro.
From August 1996 until January 1997, Glen Adams also served on the Audit
Committee. 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 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.
The members of the Executive Committee are Don D. Box and Thomas W.
Rollins. The Executive Committee possesses authority to exercise all of the
powers of the Board of Directors in the management and
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<PAGE> 7
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.
The members of the Compensation Committee are David E. Preng and Alan C.
Shapiro. 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. The membership of the Compensation
Committee consisted of Daryl L. Buchanan, Alan C. Shapiro and Richard D. Squires
from August 1996 to January 1997. Mr. Buchanan ceased to be a member in January
1997; Mr. Squires ceased to be a member in April 1997; and Mr. Preng was
appointed to the Compensation Committee in April 1997.
COMPENSATION OF DIRECTORS
Each outside Director is paid a fee of $20,000 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. Under the proposed Non-Employee Director Stock Purchase Plan,
which is being presented for stockholder approval at the Annual Meeting (Item 3
on the Proxy), each Director may elect to receive in lieu of some or all of the
cash payment for the annual fee and meeting fees the number of shares of Company
Class B (Non-Voting) Common Stock ("Class B Stock") having a value of 150% of
such cash fees. The shares of Class B Stock so received will be subject to
restrictions on transfer until one year after acquisition or, if earlier, the
termination of the Director's membership on the Board of Directors other than by
resignation.
Each Director, other than Don D. Box, David H. Hawk, James Arthur Lyle and
James A. Watt has been granted stock options to purchase shares of Class B
Stock, subject to the approval by stockholders at the Annual Meeting of the 1997
Stock Option Plan (Item 2 on the Proxy). The option grants to each Director
consist of three grants: one grant to purchase 25,000 shares to be effective May
1, 1997, at an exercise price of $6.94 per share (the closing market price of
the Class B Stock on such date); a second grant to purchase 25,000 shares to be
effective May 1, 1998, at an exercise price of $9.00 per share; and a third
grant to purchase 25,000 shares to be effective May 1, 1999, at an exercise
price of $11.00 per share. The options will have 10-year terms, will not be
exercisable until one year after their respective grants or, if earlier, the
termination of the director from the Board of Directors other than by
resignation, and will terminate 60 days after the director's ceasing to be a
member of the Board of Directors (one year if due to death or disability). Stock
options previously granted to Directors will be cancelled upon approval of the
1997 Stock Option Plan by stockholders.
Additional compensation was paid to each of Messrs. Don D. Box, Bernay C.
Box, Thomas W. Rollins and Alan C. Shapiro equal to 7,207 shares of Class B
Stock (having a market value of $50,000 on May 1, 1997), which will be subject
to restrictions on transfer until May 1, 1998. The restrictions on transfer
relating to the shares issued to Bernay C. Box will terminate December 4, 1997,
as a result of his ceasing to be a Director.
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<PAGE> 8
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 officers in certain situations. The Company
also provides the Directors with directors' and officers' liability insurance.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of September 30, 1997, the following persons held shares of the
Company's Class A Stock in amounts totaling more than 5% of the 3,219,010 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 (the "SEC").
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
NAME AND ADDRESS CLASS A STOCK PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS A STOCK
------------------- ------------------- -------------
<S> <C> <C>
S-Sixteen Holding Company............................ 1,840,525(1) 57.2%
1105 North Market, Suite 1300
Wilmington, Delaware 19801
Basil Georges........................................ 442,500 13.7%
200 Crescent Court, Suite 1800
Dallas, Texas 75201
Pat Rutherford, Jr................................... 292,500 9.1%
2550 Two Shell Plaza
Houston, Texas 77002
</TABLE>
- ---------------
(1) S-Sixteen Holding Company is controlled by Mr. J.R. Simplot and members of
his family.
RECENT CHANGE OF CONTROL OF THE COMPANY
A change of control of the Company occurred on August 29, 1997, as
described in a Schedule 13D dated August 29, 1997 (the "Simplot Schedule 13D"),
filed on behalf of BBHC; BBHC Acquisition Co., L.L.C., a Delaware limited
liability company (the "LLC"), as the owner of the common stock described in the
following paragraph; S-Sixteen Limited Partnership, an Idaho Limited
Partnership, ("S-Sixteen"), which is the sole member of the LLC; the J.R.
Simplot Self-Declaration of Revocable Trust, dated December 21, 1989, an
intervivos revocable trust of which J.R. Simplot is the trustee and beneficiary
(the "Trust"), which is the sole general partner of S-Sixteen; and Mr. J. R.
Simplot. On October 31, 1997, BBHC changed its name to S-Sixteen Holding
Company.
On August 29, 1997, the LLC purchased, in privately negotiated transactions
pursuant to a certain Master Settlement Agreement, all 33 shares of the
outstanding Class A (Voting) Common Stock of BBHC and 38,472 of the 42,875
outstanding shares of Class B (Nonvoting) Common Stock of BBHC, from Tom Box,
Don Box, Douglas Box, Gary Box, and entities controlled by them. The Simplot
Schedule 13D states that the LLC purchased the securities with $21,800,000 of
working capital contributed by S-Sixteen, none of which was borrowed funds. As
part of the purchase, Mr. Simplot also agreed to offer to purchase the remaining
4,403 shares of outstanding BBHC Class B Common Stock, and such transaction was
effectuated
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<PAGE> 9
on October 17, 1997, through the redemption of such shares by BBHC with funds
loaned to BBHC by the LLC.
S-Sixteen Holding Company is the record and beneficial holder of 1,840,525
shares (57.2%) of the outstanding Class A Stock of the Company.
In connection with the LLC's purchase of the BBHC common stock, the Board
of Directors of the Company expanded the size of the Board of Directors of the
Company to ten members and elected Mr. James A. Watt, Mr. David H. Hawk and Mr.
James Arthur Lyle to fill the newly created directorships. According to the
Simplot Schedule 13D, Mr. Hawk and Mr. Lyle previously were members of a group
with Mr. Simplot for purposes of filing a prior Schedule 13D relating to
beneficial ownership of limited partnership interests in the Predecessor
Partnership. The Simplot Schedule 13D states that Mr. Simplot will review with
the Board of Directors of the Company the qualifications, background,
willingness to serve, and other factors relating to each of the current members
of the Board of Directors with a view to evaluating which members of the Board
will continue to serve as Directors, and that Mr. Simplot may nominate himself
or others to the Board of Directors in the future. Mr. Simplot has agreed with
the Company not to replace current members of the Board of Directors until such
time as a proposed settlement of certain litigation involving the Company that
was brought by Mr. Simplot and others against the Box brothers and others is
either approved or disapproved by a majority of the Board of Directors,
excluding Mr. Hawk and Mr. Lyle.
ARRANGEMENTS RELATING TO POTENTIAL CHANGE OF CONTROL
On June 3, 1997, the Company extended a $6.95 million dollar loan to BBHC
(now named S-Sixteen Holding Company) that matures May 29, 1998, and requires
monthly installment payments of $100,000. BBHC pledged as collateral for the
promissory note the 1,840,525 shares of the Company's Class A Stock owned by
BBHC. The pledge agreement provides that in the event that BBHC defaults on the
note, the Company, upon five days' notice to BBHC, has the right to foreclose
upon and sell the collateral stock and to bid for and buy the stock (except at a
private sale). The pledge agreement also provides that upon the occurrence and
during the continuance of an event of default, the Company may direct the vote
of such stock.
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<PAGE> 10
OWNERSHIP OF MANAGEMENT
The number of shares of the Company's Class A Stock and Class B Stock
beneficially owned as of September 30, 1997, by Directors 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 A STOCK CLASS B STOCK
BENEFICIALLY PERCENT OF BENEFICIALLY PERCENT OF
OWNED CLASS A STOCK OWNED(1) CLASS B STOCK
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Bernay C. Box................... -- -- 7,207 *%
Don D. Box...................... -- -- 32,207 *
Thomas D. Box(2)................ 3,325 *% 2,000 *
Dennis A. Francis............... -- -- 10,000 *
John E. Goble, Jr............... -- -- -- --
William E. Greenwood............ -- -- -- --
David H. Hawk................... 200 * 700 *
James Arthur Lyle............... -- -- 2,607 *
Jill M. Killam(2)............... 1,000 * -- --
David E. Preng.................. 1,700 * 4,700 *
Thomas W. Rollins............... -- -- 9,207 *
Craig T. Scott(2)............... -- -- -- --
Alan C. Shapiro................. -- -- 7,207 *
James A. Watt................... -- -- 1,200 *
All Directors and executive
officers as a group (17
persons)...................... 7,875 *% 82,411 *%
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of this class.
(1) Included in the table are shares of Class B Stock issuable within 60 days of
September 30, 1997, upon the exercise of stock options pursuant to the
Company's Stock Option Plans to Don D. Box (25,000 shares), Dennis A.
Francis (10,000 shares) and Directors and executive officers as a group
(40,000 shares).
(2) The number of shares beneficially owned are as of the respective dates of
termination of employment.
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<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the compensation paid by the Company during
1994, 1995 and 1996 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 1996 exceeded $100,000 (collectively, the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- -------------------------
SECURITIES
UNDERLYING
OTHER RESTRICTED OPTIONS/ ALL OTHER
NAME AND FISCAL ANNUAL(1) STOCK SAR'S COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) ($) (#) ($)
------------------ ------ -------- ------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Don D. Box 1994 $183,000 $20,000 -- -- -- 400(2)
Executive Vice President(4) 1995 19,300 -- -- -- -- 554,100(3)
1996 -- -- -- -- -- 14,000(3)
Thomas D. Box 1994 353,300 40,000 -- -- -- 400(2)
Chief Executive Officer 1995 355,500 25,000 -- -- 50,000(5) 400(2)
and President(6) 1996 288,888 -- -- -- -- 102(2)
Craig T. Scott 1994 120,000 19,200 -- -- -- 400(2)
Executive Vice 1995 123,600 21,800 -- -- 20,000(5) 400(2)
President (7) 1996 114,772 -- -- -- -- 386,876(7)
Dennis A. Francis 1994 120,000 19,200 -- -- -- 400(2)
Senior Vice President/ 1995 123,600 21,700 -- -- 20,000(5) 400(2)
Operations(8) 1996 136,000 4,000 -- -- -- 102(2)
Jill M. Killam 1994 120,000 19,200 -- -- -- 400(2)
Vice President and 1995 123,600 21,000 -- -- 20,000(5) 400(2)
Chief Financial Officer(9) 1996 104,284 -- -- -- -- 318,102(8)
</TABLE>
- ---------------
(1) No amount is included as it is less than $50,000 or 10% of the total salary
and bonus of the individual for the year.
(2) These amounts are for group term life insurance premiums paid by the
Company.
(3) For 1995, this amount includes $463,500 of severance payments (equal to 24
months of salary), $68,900 in other severance benefits such as art work and
furniture and reclassification of certain disputed items as income, and
$21,700 for Directors' fees. For 1996, this amount is for Director's fees.
(4) Don D. Box served as Chairman of the Board from March 1991 to October 1997
and as Chief Executive Officer from August 1996 to October 1997. He served
as Director of Corporate Development from March 1994 until January 1995 and
as President from August 1996 until March 1997.
(5) All options terminated upon the optionee's termination of employment with
the Company.
(6) Thomas D. Box's employment terminated August 7, 1996.
(7) Craig T. Scott's employment terminated October 2, 1996. For 1996 this amount
includes $178 for group term life insurance premiums paid by the Company and
$386,698 of severance payments.
(8) Dennis A. Francis' employment terminated effective October 31, 1997.
(9) Jill M. Killam's employment terminated August 7, 1996. For 1996 this amount
includes $102 for life insurance premiums paid by the Company and $318,000
of severance payments.
8
<PAGE> 12
EMPLOYMENT AGREEMENT
The Company entered into an employment agreement with James A. Watt,
President and Chief Operating Officer of the Company, for a period of five years
from March 17, 1997, renewable upon mutual agreement of the parties. Under the
terms of the agreement, Mr. Watt will receive a salary of $210,000 per year,
subject to annual increases at the discretion of the Board of Directors, and be
entitled to an annual bonus, based on performance goals and targets established
by the Board of Directors or its designee, with a target bonus amount equal to
50% of his base salary. Mr. Watt received $123,000 for reimbursement of moving
expenses. The Company will recommend to the Compensation Committee of the Board
of Directors the granting to Mr. Watt 15,000 shares of restricted Class B Stock
and employee stock options to purchase 100,000 shares of Class B Stock vesting
20% per year over five years, subject to appropriate stockholder approval. If
the exercise price established for such stock options should be greater than the
market price of the Class B Stock on March 17, 1997, then Mr. Watt will be
entitled to receive on the dates of exercise of such stock options a cash
payment equal to the difference between the exercise price and the market price
on March 17, 1997, multiplied by the number of shares purchased upon such
exercises.
In the event of Mr. Watt's termination of employment by the Company other
than for cause (as defined in the agreement) or his resignation for good reason
(as defined in the agreement), Mr. Watt will be entitled to receive the amount
of his then annual base salary plus his target bonus. In the event of his
termination of employment by the Company other than for cause or by Mr. Watt for
good reason, within one year after a change of control of the Company (as
defined in the agreement), Mr. Watt will be entitled to receive a lump-sum
payment equal to a multiple of the sum of his then annual base salary plus his
target bonus. Such multiple will decline from three, if the change of control
occurs within two years after execution of the agreement, to two, if the change
of control occurs between two and four years after execution of the agreement,
to one, if the change of control occurs more than four years after execution of
the agreement. If payments to Mr. Watt upon termination of employment after a
change of control of the Company should be subject to federal excise tax, Mr.
Watt will be entitled to receive additional payments from the Company in an
amount necessary to place him in the same after-tax position as would have been
the case if no additional tax had been imposed.
SEVERANCE AGREEMENTS
The Company entered into severance agreements with all of the Named
Executive Officers other than Don D. Box. Severance payments are required upon
termination of the employee's employment within two years after a change in
control if the termination is by the Company other than for cause (as defined in
the severance agreements) or by the employee upon the occurrence of certain
enumerated events adversely affecting the employee. A change in control is
defined as the acquisition of 25% or more of the combined voting power of the
then outstanding Class A Stock, the cessation of membership of more than
one-third of the eight members of the Board of Directors of the Company on
August 16, 1995, a merger, 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. A
change in control, as defined in the severance agreements, occurred in August
1996.
In applicable situations, severance payments consist of lump-sum cash
payments equal to the sum of: (i) a pro-rata bonus, (ii) an amount equal to the
employee's base salary for eighteen months and (iii) an amount equal to the
actuarial present value, as of the date of termination, of three years'
hypothetical benefits under the Company's pension plan in addition to all vested
benefits under the Company's pension plan and any other qualified pension or
profit-sharing plans. In applicable situations, the severance agreements also
provide
9
<PAGE> 13
for the continuation of life, disability, medical, dental and hospitalization
insurance for eighteen months and for the lapsing of all restrictions on and
full vesting of any outstanding incentive awards.
OPTION GRANTS IN LAST FISCAL YEAR
No stock options were granted in 1996 to Named Executive Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
The following table provides information relating to the exercise of stock
options by the Named Executive Officers during the last year, and the number and
value of exercisable and unexercisable stock options held by such officers at
December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS AT
SHARES AT YEAR-END(#) YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Don D. Box....................... -- -- 25,000 -- -- --
Dennis A. Francis(2)............. -- -- 10,000 20,000 -- $7,500
</TABLE>
- ---------------
(1) Computed as the difference between the option exercise prices and $9.13 (the
closing price of the Class B Stock on December 31, 1996).
(2) All stock options terminated October 31, 1997, upon termination of
employment with the Company.
10
<PAGE> 14
PENSION PLAN
The following table illustrates the annual pension benefit for pension plan
participants who retire at "normal retirement age" in 1996:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE(1)(3)(4)
AVERAGE ----------------------------------------------
COMPENSATION(1)(2) 15 20 25 30 35
- -------------------------------------- ------ ------ ------ ------ ------
($) ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
125,000........................... 53,305 56,490 59,675 62,860 66,045
150,000........................... 64,493 68,490 72,488 76,485 80,483
175,000........................... 64,493 68,490 72,488 76,485 80,483
200,000........................... 64,493 68,490 72,488 76,485 80,483
225,000........................... 64,493 68,490 72,488 76,485 80,483
250,000........................... 64,493 68,490 72,488 76,485 80,483
300,000........................... 64,493 68,490 72,488 76,485 80,483
400,000........................... 64,493 68,490 72,488 76,485 80,483
450,000........................... 64,493 68,490 72,488 76,485 80,483
500,000........................... 64,493 68,490 72,488 76,485 80,483
</TABLE>
- ---------------
(1) As of December 31, 1996, 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, 1996, for the Named Executive
Officers is as follows: Don D. Box (1 year), Thomas D. Box (13 years), Craig
T. Scott (4 years), Dennis A. Francis (15 years), and Jill M. Killam (15
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
11
<PAGE> 15
Revenue Service) multiplied by his or her years of service, limited to 35 years.
If an employee terminates 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.
COMPENSATION REPORT ON EXECUTIVE COMPENSATION
The Company believes that employing and retaining highly qualified and high
performing executive officers is vital to the Company's achievement of its
long-term business goals. To this end, the Compensation Committee of the Board
of Directors which had been in place prior to July 30, 1996 (the "Prior
Committee") developed an executive compensation program which is designed to
attract and retain such officers.
The Prior Committee retained the independent accounting firm of Coopers &
Lybrand to assist in this process and to develop a philosophy and approach
regarding executive compensation. The Prior Committee's resulting philosophy was
to develop a systematic, competitive executive compensation program which
recognizes an executive officer's position and responsibilities within the
Company, takes into account competitive compensation levels payable within the
Company's industry by similarly sized companies, and reflects both individual
and Company performance.
The executive compensation program developed by the Prior Committee is
composed of the following three elements: (i) a base salary, (ii) a
performance-based annual cash incentive, and (iii) a stock-based long-term
incentive. Under this program, short-term and long-term incentives are "at risk"
and are based on performance.
Coopers & Lybrand assisted the Prior Committee in compiling data reflecting
the compensation practices of a broad range of organizations in the Company's
industry that are similar to the Company in size and performance. For both the
Base Salary and Short-Term Cash Incentives portions of executive compensation
discussed below, the Prior Committee adopted a philosophy of paying the Chief
Executive Officer at a level that is competitive at approximately the
seventy-fifth percentile of these compensation survey data and paying other
executive officers at levels that are competitive at approximately the median of
these data.
BASE SALARIES
Base salary is the portion of an executive officer's total compensation
package which is payable for performing the specific duties and assuming the
specific responsibilities defining the executive's position with the Company.
The Prior Committee's objective was to provide each executive officer a base
salary which is competitive at the desired level.
SHORT-TERM ANNUAL CASH INCENTIVES
Coopers & Lybrand assisted the Prior Committee in developing a
performance-based annual cash incentive plan covering the Company's executive
officers and top managers. The objectives in designing the plan were to reward
participants for accomplishing objectives which are generally measurable and
increase shareholder value. Under the Company's annual incentive plan, the
Compensation Committee is to establish a "target" cash incentive award for each
executive officer that is payable for achieving highly challenging performance
objectives. The Prior Committee also determined that award levels under the plan
should be fiscally prudent and competitive at the desired levels of compensation
survey data.
12
<PAGE> 16
The Prior Committee also established specific performance objectives for
the Company's Chief Executive Officer for each year which were based on
Company-level performance criteria. The Company's Chief Executive Officer is to
establish individual performance objectives for other executive officers,
subject to the Compensation Committee's approval, which are based on Company,
department and individual performance criteria.
LONG-TERM STOCK-BASED INCENTIVES
The Company maintains a stock option plan for officers and other employees.
The philosophy is to award stock options to selected plan participants based on
their levels within the Company and upon individual merit. The plan is to grant
stock options which are competitive within the industry for other individuals at
the employee's level and which provide the employee a meaningful incentive to
increase performance and focus on achieving long-term increases in shareholder
value. Other factors the Committee should consider in granting stock options
include the employee's contributions toward achieving the Company's long-term
objectives, such as reserve replacements and acquisitions, as well as the
employee's contributions in achieving the Company's short-term and long-term
profitability targets.
CHANGES TO THE COMPENSATION COMMITTEE
In connection with the changes to the Board of Directors that took place on
July 30, 1996, the Board appointed a new Compensation Committee (the "New
Committee"), consisting of Alan C. Shapiro, who had served on the Prior
Committee, Daryl L. Buchanan and Richard D. Squires, who served for the
remainder of 1996. The New Committee reviewed and approved the starting
compensation levels of officers who joined the Company after July 30, 1996.
Under the Short-Term Annual Cash Incentives plan, no annual incentive award was
made to the Chief Executive Officer for 1996. A majority of the New Committee
believes that the year-end awards paid to the other executive officers for 1996
reflect individual performance for the year in achieving plan objectives and are
fiscally prudent.
Messrs. Buchanan and Squires resigned from the Board in January and April
1997, respectively, and David E. Preng was appointed to the Compensation
Committee, which currently consists of David E. Preng and Alan C. Shapiro.
The current Committee informed management that it intends to complete a
comprehensive review of all of the Company's compensation plans in 1997.
COMPENSATION COMMITTEE
Daryl L. Buchanan
Alan C. Shapiro
Richard D. Squires
13
<PAGE> 17
PERFORMANCE GRAPH
The following performance graph compares the performance of both classes of
the Company's common stock to the Nasdaq indices of United States companies and
to a peer group composed of Nasdaq companies listed under the Standard
Industrial Classification Codes 1310-1319 for the Company's last five fiscal
years. These industrial codes include companies engaged in the oil and gas
business. The graph assumes that the value of an investment in the Company's
common stock and in each index was $100 at December 31, 1991, and that all
dividends were reinvested.
<TABLE>
<CAPTION>
Measurement Period NASDAQ
(Fiscal Year Covered) BOXXA(1) BOXXB(1) NASDAQ U.S. O&G
<S> <C> <C> <C> <C>
12/31/91 100.00 100.00 100.00 100.00
12/31/92 182.61 167.39 116.38 115.33
12/31/93 452.17 219.56 133.60 136.77
12/31/94 243.47 186.95 130.59 126.36
12/31/95 189.13 150.00 184.67 133.25
12/31/96 160.87 158.69 227.16 191.56
</TABLE>
- ---------------
(1) The closing price for depositary receipts for units of limited partnership
interest of the Predecessor Partnership as traded on the Pacific Stock
Exchange was used for purposes of this performance graph as the price of
both classes of the Company's common stock for all periods prior to the
Corporate Conversion from the Predecessor Partnership on April 15, 1992.
14
<PAGE> 18
EXECUTIVE OFFICERS
The following table provides information with respect to persons serving as
executive officers of the Company, who hold their respective offices at the
pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James A. Watt........................ 47 President and Chief Operating Officer
Don D. Box........................... 47 Executive Vice President
Steven J. Craig...................... 45 Senior Vice President/Planning and
Administration
J. Burke Asher....................... 56 Chief Accounting Officer and Secretary
Edward V. Howard..................... 34 Vice President, Controller and Assistant
Secretary
</TABLE>
The following is a brief description of the background and principal
occupation of each executive officer of the Company, other than for Mr. Don D.
Box and Mr. James A. Watt whose descriptions appear under "Election of
Directors." The periods of service shown below for officers of the Company
include service prior to the Corporate Conversion, as officers of CKB &
Associates, Inc., the corporate general partner of the Predecessor Partnership.
Steven J. Craig has served as Senior Vice President/Planning and
Administration of the Company since April 1997, and served as Administrative
Assistant to the Chairman from August 1996 to April 1997. He served as Vice
President and Assistant Treasurer of BBHC, CKB & Associates, Inc. and CKB
Petroleum, Inc. from March 1997 to October 1997, and as a director from March
1997 to August 1997. Mr. Craig served as Assistant Treasurer and Controller of
CKB & Associates, Inc. and CKB Petroleum, Inc. from March 1996 to March 1997,
and served as Chief Financial Officer and Assistant Treasurer of BBHC from May
1996 to March 1997. He served as Vice President of the Company from February
1994 to March 1995. Mr. Craig was self employed in real estate and consulting
from 1992 to 1994 and from March 1995 to March 1996.
J. Burke Asher, has served as Chief Accounting Officer of the Company since
September 1996 and as Secretary since October 1996. He has served as Treasurer
and Assistant Secretary of BBHC, CKB & Associates, Inc. and CKB Petroleum, Inc.
since March 1997. He served as a director of BBHC and CKB & Associates, Inc.
from March 1997 to August 1997, and as a director of CKB Petroleum, Inc. from
March 1997 to April 1997. 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
communications industry, from 1993 to 1995.
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. He has served as Assistant Secretary since October 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
J. Burke Asher, who became an officer of the Company on September 3, 1996,
filed one late Form 3 on December 20, 1996.
15
<PAGE> 19
LITIGATION INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
THE GRIFFIN LITIGATION
Griffin et al. v. Box, et al. (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 Stock. The defendants are Cloyce K. Box and CKB & Associates,
Inc., who acted as the general partners of the Predecessor Partnership (the
"General Partners"), the Predecessor Partnership, and BBHC. The Cloyce K. Box
Estate (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. 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, including the 1985 purchase of an interest in an oil
pipeline by CKB Petroleum, Inc.
In March 1994, the district court entered its initial judgment in favor of
the Company and against the Estate and CKB & Associates, Inc. in the amount of
approximately $20 million for past damages and against the Estate in the amount
of $2.2 million for punitive damages. On appeal, the Fifth Circuit Court of
Appeals, among other things, reversed the judgment and related damages against
the Estate and CKB & Associates, Inc. and remanded the case for a new trial and
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. On June 30, 1997, the district court dismissed without prejudice
the remanded case for lack of jurisdiction. The Plaintiffs subsequently filed
essentially the same claims in the state district court in Dallas, Texas. In
February 1995 and March 1995, the Plaintiffs also filed two actions, which were
consolidated, against the Company, Don D. Box, Douglas D. Box, Gary D. Box, and
directors and officers of the Company in state district court in Dallas, Texas,
alleging 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 and alleging 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 attorneys' fees in the
Griffin Case.
THOMAS D. BOX LAWSUITS
On August 16, 1996, Thomas D. Box filed a lawsuit, directly and
derivatively on behalf of the Company, in the District Court for Dallas County,
Texas, against Gary Box, Don Box, Doug Box, BBHC and CKB Petroleum, Inc.,
alleging that the defendants breached fiduciary duties to BBHC and its
subsidiary CKB Petroleum, Inc. and wasted or converted their assets and seeking
an accounting, unspecified damages, costs and attorneys' fees and for the
appointment of a receiver for BBHC and CKB Petroleum, Inc.
PROPOSED SETTLEMENTS OF GRIFFIN AND THOMAS D. BOX LITIGATION
On August 29, 1997, in connection with the sale of control of BBHC, Thomas
D. Box, Don D. Box, Douglas D. Box, Gary D. Box and others entered into a
settlement agreement providing for the settlement of all pending litigation
among the parties. The settlement will be subject to either court approvals or a
determination by the appropriate court that court approval is not required. On
August 29, 1997, the Company also entered into an agreement in principle to
settle the Griffin Case that would provide for Mr. J.R. Simplot
16
<PAGE> 20
to receive $1.9 million for attorneys' fees and provide for Mr. James Lyle to
receive $100,000 for attorneys' fees, be appointed to the Company's Board of
Directors and be granted the right to convert his 2,500 shares of Class B Stock
into an equal number of shares of Class A Stock. This agreement is subject to
the parties' entering into a definitive settlement agreement and on the receipt
of any required court approvals.
DEVERE AND NEALON CASES
Two class actions, one by plaintiff Melissa Devere and the other by
plaintiffs Caren M. Nealon and B. Peter Knudson, were filed in the Chancery
Court of Delaware in Wilmington in April and May 1995 against the Company and
the directors of the Company at that time, which included Don D. Box and Alan C.
Shapiro. The plaintiffs, who are holders of the Company's Class B Stock, 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 failed to solicit other offers for the sale of the
Company. 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 cases were
consolidated, and the defendants filed a motion seeking to dismiss the
consolidated case. The defendants also filed a motion to stay discovery while
the motion to dismiss is pending.
RELATED PARTY TRANSACTIONS
S-Sixteen Holding Company owns approximately 57% of outstanding shares of
the Class A Stock of the Company and 94% of the outstanding shares of both CKB
Petroleum, Inc. and CKB & Associates, Inc. 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 the 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 CKB Petroleum, Inc. for
transporting crude oil from its South Pass blocks. Since March 1985, CKB
Petroleum, Inc. 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 CKB Petroleum,
Inc. CKB Petroleum, Inc. billed the Company $2.8 million for oil transportation
expense in 1996. The transactions between the Company and CKB Petroleum, Inc.
are the subject of litigation involving the Company. See "Litigation Involving
Directors and Executive Officers -- The Griffin Litigation" and "-- Proposed
Settlements of Griffin and Thomas D. Box Litigation."
During 1996, the Company billed CKB Petroleum, Inc. and other related
parties, including the Cloyce K. Box Estate, BBHC and certain of their
affiliates, $81,000 for the estimated fair value of usage of an allocated
portion of subleased office space, certain payroll costs and benefits and other
overhead costs. The amounts billed were considered to be the fair value of such
usage.
On April 29, 1997, the Company lent BBHC (now named S-Sixteen Holding
Company) $7.25 million to retire existing secured debt of BBHC. The note to the
Company was payable on May 29, 1997, but was extended to June 3, 1997. After
partial repayment by BBHC of the note, the Company extended a new note in the
amount of $6.95 million at an interest rate of 9.5% that matures May 29, 1998,
and requires monthly
17
<PAGE> 21
installment payments of $100,000. BBHC pledged as collateral for the promissory
note the 1,840,525 shares of the Company's Class A (Voting) Common Stock owned
by BBHC. The pledge agreement provides that in the event that BBHC defaults on
the note, the Company, upon five days' notice to BBHC, has the right to
foreclose upon and sell the collateral stock and to bid for and buy the stock
(except at a private sale). The pledge agreement also provides that upon the
occurrence and during the continuance of an event of default, the Company may
direct the vote of such stock.
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
died 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. The Company paid an additional
$51,000 to or on behalf of the Estate for the remainder of 1996.
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,
however, reversed the award of plaintiffs' attorneys' fees and costs. 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 CKB
& Associates, Inc. and the amount of other claims pending against the Estate.
The Company paid $132,542 to Preng & Associates, Inc., which is
majority-owned by David E. Preng, a Director of the Company, for executive
search services provided to the Company from August 1996 to April 1997.
18
<PAGE> 22
PROPOSAL TO APPROVE THE
BOX ENERGY CORPORATION
1997 STOCK OPTION PLAN
The proposed 1997 Stock Option Plan (the "Stock Option Plan") is intended
to benefit the Company by providing Directors and key employees of the Company
with additional incentives and giving them a greater interest as shareholders in
the success of the Company. The Stock Option Plan was adopted by the Company's
Board of Directors on June 18, 1997, subject to approval by holders of the Class
A Stock.
The text of the proposed Stock Option Plan, which is summarized below, is
set forth as Exhibit A to this Proxy Statement, and this summary is qualified in
its entirety by reference to Exhibit A.
The Stock Option Plan provides for the issuance of options to purchase only
Class B Stock and is administered by a committee (the "Committee") of two or
more Directors of the Company who each qualify as a "Non-Employee Director"
under Rule 16b-3 under the Securities Exchange Act of 1934, as amended and as an
"outside director" under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). Directors and those key employees of the Company and its
subsidiaries selected by the Committee are eligible to be granted options under
the Stock Option Plan. The Committee has the discretion to determine the
participants to be granted options, the number of shares granted to each person,
the purchase price of the Class B Stock covered by each option and other terms
of the option. Options intended to meet the requirements of Section 162(m) of
the Code will have an exercise price no less than the fair market value of the
Class B Stock on the date of grant. The Committee estimates that approximately
30 employees will be eligible participants.
Options granted under the Stock Option Plan may be either incentive stock
options qualifying under Section 422 of the Code or non-qualified stock options.
The Company may issue up to 2,750,000 shares of Class B Stock upon the exercise
of options granted under the Stock Option Plan, but no individual may be issued
more than 275,000 shares. In the event any option terminates, expires or is
surrendered without having been exercised in full, the shares subject to such
option will again be available for issuance pursuant to options to be granted
under the Stock Option Plan. The shares of Class B Stock to be issued upon
exercise of options may be authorized but unissued shares or shares previously
issued and reacquired by the Company. The Stock Option Plan will terminate 10
years after its effective date, which will be the date it is approved by the
Class A Stockholders.
The term of an option will be fixed by the Committee, but in no event will
the term be more than 10 years (five years with respect to incentive stock
options granted to a holder of more than 10% of the total combined voting power
of all classes of stock then outstanding) from the date of grant. Each option
will be exercisable at such times and upon such conditions as the Committee may
determine, except that the aggregate fair market value of Class B Stock with
respect to which incentive stock options are exercisable for the first time by
an optionee in any calendar year may not exceed $100,000. The option exercise
price will be determined by the Committee, but may not be less than the par
value of the Class B Stock, and in the case of incentive options may not be less
than the fair market value of the Class B Stock on the date of grant or 110% of
the fair market value with respect to any incentive stock options granted to a
holder of more than 10% of the total combined voting power of all classes of
stock then outstanding. Option holders will pay the option exercise price in
cash or, unless the Committee objects, in shares of Common Stock owned by the
option holder. The Committee may provide the option holder with the right to
satisfy any withholding tax obligation by delivery of previously owned shares or
withholding shares otherwise issuable upon exercise of a non-qualified stock
option. The Committee may provide that unexpired and unvested options will
become fully exercisable upon a change in
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<PAGE> 23
control of the Company, as defined in the stock option agreement. Adjustments
will be made to the option exercise price and number of shares covered by
outstanding options to prevent dilution or enlargement of rights of option
holders as a result of certain corporate events, such as reorganizations,
mergers, stock splits, stock dividends or other changes in the capital structure
of the Company. Adjustments will also be made to the number of shares remaining
subject to issuance under the Stock Option Plan and to the maximum number of
shares issuable to any individual.
In the event of the retirement of an optionee at the normal retirement age
in accordance with the retirement policy of the Company, or the resignation of
the optionee with the written consent of the Company, or after ceasing to be a
member of the Board of Directors in the case of a director who is not an
employee of the Company, an optionee may exercise vested options for a period of
60 days following the date of such retirement, resignation, or ceasing to be a
director. In the event of his death or disability, the optionee may exercise
vested options for a period of one year from the date of death or disability. In
the event of any other termination of employment, unless otherwise determined by
the Committee, all outstanding options held by the optionee will terminate on
the date of such termination of employment. No option, however, will be
exercisable after the expiration of the term of the option.
The Board of Directors may suspend, terminate or amend the Stock Option
Plan at any time, except that without the approval of the shareholders no such
amendment may increase the maximum number of shares subject to the Stock Option
Plan, increase the maximum number of shares issuable to any person or change the
designation of the class of persons eligible to receive options.
Subject to receiving stockholder approval of the Stock Option Plan, each
Director, other than Don D. Box, David H. Hawk, James Arthur Lyle and James A.
Watt, has been granted stock options in three grants: one grant to purchase
25,000 shares effective May 1, 1997, at an exercise price of $6.94 per share
(the closing market price of the Class B Stock on such date); a second grant to
purchase 25,000 shares to be effective May 1, 1998, at an exercise price of
$9.00 per share; and a third grant to purchase 25,000 shares to be effective May
1, 1999, at an exercise price of $11.00 per share. The options will not be
exercisable until one year after their respective grants or, if earlier, the
termination of the director from the Board of Directors other than by
resignation, and will terminate 60 days after the director's ceasing to be a
member of the Board of Directors (one year if due to death or disability).
Pursuant to an employment agreement with James A. Watt, the Company's President
and Chief Operating Officer, the Company will recommend to the Committee,
subject to receiving stockholder approval of the Stock Option Plan, the grant to
Mr. Watt of options covering 100,000 shares at an exercise price of market value
on the day of grant, with the options to become exercisable 20% per year over
five years.
FEDERAL INCOME TAX CONSEQUENCES
No taxable income will be realized by a participant upon the grant of a
non-qualified stock option. Upon exercise, the excess of the fair market value
of the shares at the time of exercise over the option exercise price for such
shares will generally constitute taxable compensation. The Company or a
subsidiary will be entitled to a deduction for such compensation income
(assuming any federal income tax withholding requirements are satisfied). Upon
disposition of the shares acquired upon exercise, any appreciation (or
depreciation) in the stock value after the date of exercise will be treated as
capital gain (or loss).
No taxable income will be recognized by a participant upon the grant or
exercise of an incentive stock option, assuming there is no disposition of the
option shares within two years after the option was granted or within one year
after the option was exercised (the "holding period"), and provided that the
participant has
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<PAGE> 24
been employed by the Company or one of its subsidiaries from the date of grant
to a date that is not more than three months before the date of exercise. The
exercise of an incentive stock option, however, could result in an item of tax
preference for purposes of the alternative minimum tax. The sale of incentive
stock option shares after the holding period at a price in excess of the
participant's adjusted basis (ordinarily the option exercise price) will
constitute capital gain to the participant, and neither the Company nor any
subsidiary will be entitled to a federal income tax deduction by reason of the
grant or exercise of the option or the sale of the shares. If incentive stock
option shares are sold by the participant prior to the expiration of the holding
period, generally the participant will have compensation income taxable in the
year of such sale in an amount equal to the excess, if any, of the fair market
value of such shares at the time of exercise of the option (or, if less, the
amount received upon the sale) over the option exercise price for such shares.
The Company or a subsidiary will be entitled to a deduction for such
compensation income (assuming any federal income tax withholding requirements
are satisfied).
Adoption of the proposed 1997 Stock Option Plan requires approval by the
affirmative vote of the holders of a majority of the shares of Class A Stock
present or represented by proxy and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
PROPOSAL TO APPROVE THE
BOX ENERGY CORPORATION
NON-EMPLOYEE DIRECTOR STOCK PURCHASE PLAN
The proposed Non-Employee Director Stock Purchase Plan (the "Director Stock
Purchase Plan") is intended to encourage Directors of the Company to acquire a
greater equity interest in the Company by providing a means for them to receive
their director fees in shares of Class B Stock. The Director Stock Purchase Plan
was adopted by the Board of Directors on June 18, 1997, subject to approval by
holders of the Class A Stock.
The text of the proposed Director Stock Purchase Plan, which is summarized
below, is set forth as Exhibit B to this Proxy Statement, and this summary is
qualified in its entirety by reference to Exhibit B.
Each non-employee Director of the Company may elect once each year to
receive all or a portion of the fees he receives as a Director in restricted
shares of Class B Stock in lieu of cash. The number of shares of Class B Stock
to be received will be the number shares that will equal 150% of the cash amount
of such Director's fees divided by the closing market price of the Class B Stock
on the day that cash fees would otherwise be paid to the Director. The shares of
Class B Stock will be restricted from transfer by the Director until one year
after issuance or, if earlier, his termination as a member of the Board of
Directors as a result of his death, disability, removal or failure to be
nominated for an additional term. The Director will have the right to vote the
shares of restricted stock and to receive any dividends paid in cash or other
property.
The Director Stock Purchase Plan may be terminated at any time upon a vote
of the Board of Directors to terminate the Plan.
Adoption of the proposed Director Stock Purchase Plan requires approval by
the affirmative vote of the holders of a majority of the shares of Class A Stock
present or represented by proxy and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
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PROPOSAL TO CHANGE THE NAME OF THE COMPANY
As a result of sale of control of BBHC, members of the family of Cloyce K.
Box no longer control the voting stock of the Company. Accordingly, the Board of
Directors believes it is advisable to change the name of the Company from Box
Energy Corporation to Remington Oil and Gas Corporation. The Board of Directors
adopted the following resolution and directed that it be submitted for approval
of shareholders of the Class A Stock:
RESOLVED, that Article First of the Certificate of Incorporation of
the Company be amended to read in its entirety as follows:
The name of the corporation is Remington Oil and Gas Corporation.
Adoption of the proposal to change the name of the Company requires
approval by the affirmative vote of the holders of a majority of the outstanding
shares of Class A Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
OTHER MATTERS
THE SOLICITATION
The cost of solicitation of proxies will be borne by the Company. Proxies
may be solicited by mail, advertisement, telephone and in person. Directors and
employees of the Company may, without additional compensation, make
solicitations through personal contact or by telephone or telecopy, and
arrangements may be made with brokerage houses or other custodians, nominees and
fiduciaries to send proxy material to their principals. The Company will
reimburse any such persons for their reasonable expenses.
AUDITORS
On September 23, 1996, the Company dismissed Coopers & Lybrand L.L.P. as
the Company's independent accountant and appointed Arthur Andersen LLP as the
Company's independent accountant for the remainder of fiscal year 1996 and for
fiscal year 1997, effective with such appointment. The change in independent
accountants was recommended by the Audit Committee of the Company's Board of
Directors and approved by the Board of Directors.
Coopers & Lybrand L.L.P.'s reports on the financial statements for the 1994
and 1995 fiscal years did not contain an adverse opinion, disclaimer of opinion,
qualification, or modification as to uncertainty, audit scope, or accounting
principles, except as set forth in the last four sentences of this paragraph.
Furthermore, during the two most recent fiscal years and the interim period
subsequent to December 31, 1995, there have not been any disagreements with
Coopers & Lybrand L.L.P. on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Coopers & Lybrand L.L.P.,
would have caused that firm to make reference to the subject matter of such
disagreements in connection with its report. The Company wishes to point out,
however, that the report of Coopers & Lybrand L.L.P. included in the Company's
Annual Report to Stockholders for the year ended December 31, 1994, contained
the following additional statements: "As discussed in Note 1 to the financial
statements, the Company changed its method of accounting for marketable
securities in 1994. As discussed in Note 10 to the financial statements, the
Company is a defendant in a lawsuit brought by Phillips Petroleum Company. The
ultimate outcome of the litigation cannot presently be determined. Accordingly,
no
22
<PAGE> 26
provision for any liability that may result upon adjudication has been made in
the accompanying financial statements."
During the two most recent fiscal years and through September 23, 1996,
neither the Company nor anyone on its behalf consulted with Arthur Andersen LLP
regarding the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on the Company's financial statements.
Although representatives of Coopers & Lybrand L.L.P. are not expected to be
present at the Meeting, representatives of Arthur Andersen LLP are expected to
be present at the Meeting and will be available to respond to appropriate
questions. The representatives of Arthur Andersen LLP will have an opportunity
to make a statement if they desire to do so.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Stockholder proposals for inclusion in the proxy materials and
consideration at the Company's 1997 annual meeting must be received by the
Company before December 1, 1997 in order to be considered for inclusion in the
proxy materials of the Company for that meeting. Any such proposal must comply
in all respects with the rules and regulations of the Securities and Exchange
Commission.
ANNUAL REPORT
The Company's 1996 Annual Report to Stockholders has previously been sent
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, 1996, WILL BE SENT TO EACH PERSON TO WHOM A PROXY 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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EXHIBIT A
BOX ENERGY CORPORATION
1997 STOCK OPTION PLAN
1. Purpose. The purpose of this 1997 Stock Option Plan (the "Plan") is to
advance the interests of Box Energy Corporation (the "Company") by encouraging
certain employees of the Company and its subsidiaries and non-employee directors
of the Company to acquire a proprietary interest in the Company through
ownership of Class B Common Stock of the Company (the "Common Stock") and
thereby to provide such employees and directors additional incentives in the
success of the Company, to encourage such employees to remain with the Company
and to attract other qualified persons to become employees.
2. Administration. The Plan shall be administered by a Committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board of
Directors"), which Committee shall be composed of not less than two directors of
the Company who each qualify as (i) a "Non-Employee Director" under Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor provision and (ii) an "outside director" under Treasury
Regulations Section 1.162-27 promulgated under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor provision.
Subject to the provisions of the Plan, the Committee is authorized to determine
participants to whom options will be granted, the times at which options will be
granted, the periods during which they will be exercisable, and the number of
shares, the exercise price and other terms and conditions of such options. The
Committee shall have full and final authority to interpret the Plan and options
granted thereunder, to prescribe, amend and rescind rules and regulations
relating to the Plan and the options, and to make other determinations necessary
or advisable for the administration of the Plan, all of which determinations
shall be conclusive and binding on all persons. A majority of the Committee
shall constitute a quorum, and the Committee shall act pursuant to a majority
vote or by unanimous written consent. The Board of Directors also may grant
options to directors and employees under the Plan, and any authority and
discretion provided to the Committee with respect to the granting of stock
options by the Committee hereunder shall also apply to the Board of Directors
with respect to stock options granted by the Board of Directors.
3. Eligibility. Directors of the Company, and such key employees of the
Company and any of its subsidiaries as the Committee shall determine from time
to time, shall be eligible to be granted options under the Plan.
4. Stock Subject to Options. The aggregate number of shares of Common Stock
that may be issued upon the exercise of options granted under the Plan shall not
exceed 2,750,000, subject to adjustment under the provisions of paragraph 12. In
addition, the maximum number of shares of Common Stock that may be issued to any
individual under the Plan shall be 275,000, subject to adjustment under the
provisions of paragraph 12. Such shares of Common Stock may be either authorized
but unissued shares or previously issued shares that shall have been reacquired
by the Company. If any outstanding option under the Plan is forfeited, expires
or is terminated for any reason, the shares of Common Stock subject to the
unexercised portion of such option shall again be available for issuance
pursuant to the grant of stock options.
5. Types of Options. Options granted pursuant to the Plan may be either
"incentive stock options" under Section 422 of the Code or "non-qualified stock
options" that do not qualify as incentive stock options. The Committee shall
have full authority to determine which options, if any, shall be incentive stock
options and which shall be non-qualified stock options. The grant of an option
under the Plan shall be evidenced by a
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written agreement executed by the Company and the optionee, in such form and
containing such terms and conditions as the Committee may determine, subject to
the provisions and limitations contained in the Plan.
6. Transferability of Options. The Committee may in its discretion provide
in any stock option agreement that all or a portion of such option may be
transferred by the optionee on such terms and subject to such limitations set
forth in the stock option agreement. Unless a stock option agreement
specifically permits transfer of an option, no option shall be transferable by
the optionee otherwise than by will or the laws of descent and distribution, and
each option shall be exercisable during the lifetime of the optionee only by the
optionee or by his or her guardian or legal representative.
7. Allotment of Shares; Exercise Price. The Committee shall determine,
subject to the limitations set forth in paragraph 4, the total number of shares
covered by each option and the exercise price therefor (which may not be less
than the par value of the Common Stock) to be granted to each optionee under the
Plan. The exercise price with respect to incentive stock options shall not be
less than the Fair Market Value (as hereinafter defined) on the date of grant,
nor less than 110% of such Fair Market Value in the case of any incentive stock
option granted to any individual who, at the time the option is granted, owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company, any of its subsidiaries or its parent. "Fair Market
Value" of the Common Stock as of any date shall be the closing price on such
date (or if no trades occurred on such date on the next preceding day on which
trading occurred) as reported for consolidated transactions on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading or on the NASDAQ National Market System or SmallCap Market System, or if
not so listed or admitted to trading, the average of the high bid and low asked
prices of the Common Stock on such date in the over-the-counter market as
reported by the NASDAQ reporting system or other system then in use.
8. Term of Option. Each option shall be granted for such term as the
Committee shall determine; provided, that no option shall be exercisable more
than 10 years after the date of grant, and no incentive stock option granted to
an individual who, at the time the option is granted, owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company, any of its subsidiaries or its parent shall by its terms be exercisable
more than five years from the date of grant.
9. Exercises. Except as otherwise set forth herein, each option shall be
exercisable over such period and at such times as the Committee shall determine.
In addition to any other limitations set forth herein, the aggregate Fair Market
Value of the shares of Common Stock with respect to which incentive stock
options are exercisable for the first time by an optionee in any calendar year
(under all plans of the Company and its subsidiaries and its parent) shall not
exceed $100,000. No option shall be exercised for fewer than 100 shares unless
the remaining shares purchasable under the option are fewer than 100 shares. The
Committee may provide in any stock option agreement that upon a Change in
Control (as hereinafter defined) all previously granted, unexpired options of an
optionee will immediately become fully exercisable to the extent of shares then
covered by such option. A "Change in Control" shall mean any of the following
events:
(i) a merger or consolidation to which the Company is a party if the
individuals and entities who were stockholders of the Company immediately
prior to the effective date of such merger or consolidation have beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of less than
50% of the total combined voting power for election of directors of the
surviving corporation following the effective date of such merger or
consolidation;
(ii) the acquisition or holding of direct or indirect beneficial
ownership (as defined under Rule 13d-3 of the Exchange Act) of securities
of the Company representing in the aggregate 30% or
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<PAGE> 29
more of the total combined voting power of the Company's then issued and
outstanding voting securities by any person, entity or group of associated
persons or entities acting in concert, other than S-Sixteen Holding
Company, any employee benefit plan of the Company or of any subsidiary of
the Company, or any entity holding such securities for or pursuant to the
terms of any such plan, beginning from and after such time as S-Sixteen
Holding Company shall no longer have direct or indirect beneficial
ownership (as so defined) of securities of the Company representing in the
aggregate a larger percentage of the total combined voting power of the
Company's then issued and outstanding securities than that held by any
other person, entity or group;
(iii) the sale of all or substantially all of the assets of the
Company to any person or entity that is not a wholly owned subsidiary of
the Company; or
(iv) the approval by the stockholders of the Company of any plan or
proposal for the liquidation of the Company or its material subsidiaries,
other than into the Company.
10. Payment for Shares.
(a) Purchase Price. The purchase price of each share of Common Stock
purchased upon the exercise of any option granted hereunder shall be paid in
full at the time of such purchase, and a stock certificate representing such
shares shall be delivered therefor. Until the stock certificate for such shares
is issued in the optionee's name, such optionee will have no rights of a
stockholder of the Company. Payment may be made in whole or in part in cash or,
unless the Committee shall object, in common stock of the Company previously
owned by the optionee for such period as the Committee may require, valued at
Fair Market Value on the day preceding the date of exercise.
(b) Tax Withholding. It shall be a condition to the performance of the
Company's obligation to issue or transfer shares of Common Stock upon exercise
of an option that the optionee pay, or make provision satisfactory to the
Company for the payment of, any taxes which the Company is obligated to collect
with respect to the issuance or transfer of such shares. The Committee may
provide the optionee with the right to satisfy federal or state tax obligations
by delivery of previously owned shares, or electing to have the Company withhold
shares otherwise issuable upon exercise of a non-qualified stock option, the
Fair Market Value of which does not exceed the amount required to cover the
federal or state tax obligation (including FICA) incurred in connection with the
exercise of such option.
11. Termination of Options.
(a) Death or Disability. In the event of the death or total and permanent
disability (as provided in the Company's disability insurance policy, under
Company policy or under procedures established by the Committee) of an optionee,
any option granted hereunder and held by such optionee may thereafter be
exercised, to the extent exercisable on the date of such death or disability, or
to such greater extent as the Committee may at any time determine, for a period
of one year from the date of death or disability, but in no event after the
expiration of the term of such option.
(b) Retirement or Resignation with Consent of the Company. In the event of
the retirement of an optionee at the normal retirement age in accordance with
the retirement policy of the Company, or the resignation of the optionee with
the written consent of the Company, or the ceasing to be a member of the Board
of Directors in the case of a director who is not an employee of the Company,
any option held by such optionee may thereafter be exercised, to the extent
exercisable on the date of such retirement, resignation or ceasing to be a
director, or to such greater extent as the Committee may at any time determine,
for a period of
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60 days following the date of such retirement, resignation, or ceasing to be a
director, but in no event after the expiration of the term of such option.
(c) Other Termination. In the event of a termination of employment of an
optionee other than by reason of death, disability, normal retirement or
resignation with the written consent of the Company, unless otherwise determined
by the Committee, any option granted hereunder and held by such optionee shall,
to the extent not previously exercised, forthwith terminate on the date of such
termination of employment.
12. Adjustment of Options. In the event of any stock dividend, stock split,
combination of shares, merger, consolidation, recapitalization, reclassification
or other similar capital or corporate structure change, the number of shares of
Common Stock at the time of such change remaining subject to the Plan, the
maximum number of shares issuable to any individual, the number of shares
subject to any outstanding options and the exercise price thereof and any other
relevant provisions of such options shall be appropriately adjusted to reflect
such change, and the Committee's determination as to the terms of any such
adjustments shall be binding and conclusive on all persons.
13. Effective Date. The Plan shall become effective on the date of approval
of the Plan by the holders of a majority of the shares of Class A Common Stock
of the Company present at a duly held meeting of stockholders.
14. Amendment. The Board of Directors may at any time suspend or terminate
the Plan or amend it from time to time in any respect, except that without the
appropriate approval of the holders of Class A Common Stock, no such amendment
shall increase the maximum number of shares subject to the Plan, increase the
maximum number of shares issuable to any person or change the designation of the
class of persons eligible to receive options.
15. Legal Compliance. The obligation of the Company to sell and deliver
shares of Common Stock pursuant to the exercise of an option is subject to such
compliance as the Company deems necessary or advisable with federal and state
laws, rules and regulations applying to the authorization, issuance, listing or
sale of securities. The Company may also require in connection with any grant or
exercise of an incentive stock option that the optionee agree to notify the
Company when making any disposition of the shares received on exercise of such
incentive stock option, whether by sale, gift or otherwise, within two years of
the date of grant or within one year of the date of exercise.
16. No Employment Right. Nothing contained in the Plan or in any option
granted thereunder shall confer upon any optionee any right to continued
employment by the Company, any of its subsidiaries or parent, or to continued
membership on the Board of Directors, or limit in any way the right of the
Company, any of its subsidiaries or its parent to terminate the optionee's
employment at any time. The granting of any option hereunder shall impose no
obligation upon the optionee to exercise any option.
17. Indemnification. In addition to any other rights of indemnification as
members of the Board of Directors of the Company and to the extent permitted by
law, the members of the Committee shall be indemnified and held harmless by the
Company against all loss, damage and expenses, including reasonable attorneys'
fees, actually and reasonably incurred in connection with the defense of any
action, suit or proceeding to which any of them may be a party by reason of any
action taken or any failure to act under or in connection with the Plan or any
option granted thereunder, and against all amounts paid by them in settlement
thereof approved by legal counsel to the Company, provided that such members
shall have notified the Company promptly after the institution of any such
action, suit or proceeding.
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EXHIBIT B
BOX ENERGY CORPORATION
NON-EMPLOYEE DIRECTOR STOCK PURCHASE PLAN
1. Purpose. The Purpose of this Non-Employee Director Stock Plan is to
advance the interests of Box Energy Corporation (the "Company") by encouraging
non-employee directors of the Company to acquire a greater proprietary interest
in the Company through ownership of Class B Common Stock of the Company (the
"Common Stock"). References to a "director" herein shall mean a non-employee
director.
2. Election to Receive Stock. Each member of the Board of Directors of the
Company who is not an employee of the Company may elect once each year prior to
January 1, to be effective for the following year and until an new election is
made, to receive all or a portion of the fees payable to such director in cash
or in lieu of cash (if not all of the cash amount, in increments of $1,000) in
restricted shares of Common Stock. The number of restricted shares of Common
Stock issuable in accordance with an election hereunder shall be equal to the
product of 1.5 multiplied by the dollar amount of cash that will instead be
received in restricted shares, divided by the Fair Market Value of the Common
Stock on the date (or scheduled date) of payment of the applicable fee, with any
fraction of a share rounded down to a whole number. "Fair Market Value" of the
Common Stock as of any date shall be the closing price on such date (or if no
trades occurred on such date on the next preceding day on which trading
occurred) as reported for consolidated transactions on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or on the NASDAQ Market System, or if not so listed or admitted to trading, the
average of the high bid and low asked prices of the Common Stock on such date in
the over-the-counter market as reported by the NASDAQ reporting system or other
system then in use.
3. Issuance of Shares. On each quarterly payment date of directors' fees at
which an election to receive restricted shares of Common Stock is effective, for
each director so electing a stock certificate evidencing the appropriate number
of restricted shares shall be issued and registered in the name of the director.
The stock certificates evidencing such shares shall be held in custody by the
Company until the restrictions thereon shall have lapsed, after which such
certificates shall be delivered to the appropriate director. The Company shall
not be required to issue shares hereunder until such shares have been listed or
admitted to trading on the appropriate stock exchange or trading market and the
Company has complied with applicable federal and state securities laws.
4. Restrictions. Each share of Common Stock issued to a director pursuant
to the Plan may not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of until a period of one year from the date of issuance or,
if earlier, on the date of termination of such director as a member of the Board
of Directors as a result of his death, disability, removal or failure to be
nominated for an additional term as a member of the Board of Directors.
5. Voting and Dividend Rights. During the period in which the restrictions
provided herein are applicable to the shares of Common Stock, the director shall
have the right to vote such shares and to receive any dividends paid in cash or
other property with respect to such shares. Shares of Common Stock distributed
by the Company as a result of any stock dividend, stock split, reclassification
or other similar capital or corporate structure change shall be subject to the
same restrictions as the shares with respect to which they were distributed.
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<PAGE> 32
6. Termination of Plan. The Plan may be terminated at any time upon a vote
of the Board of Directors to terminate the Plan. Upon termination of the Plan,
restrictions on shares of Common Stock shall continue in effect and shall lapse
in accordance with the terms of the Plan at the time of issuance of such shares.
7. Effective Date. The Plan shall become effective on the date of approval
of the Plan by the holders of a majority of the shares of Class A Common Stock
of the Company present at a duly held meeting of stockholders.
B-2
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APPENDIX
BOX ENERGY CORPORATION
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Don D. Box, Alan C. Shapiro and J.
Burke Asher, or any of them, proxies with full power of substitution, to vote
as set forth herein all shares of the Class A Common Stock of the Company held
of record by the undersigned on October 23, 1997, at the Annual Meeting of
Stockholders of Box Energy Corporation (the "Company") to be held on December
4, 1997, at 1:00 p.m., central standard time, and any adjournments or
postponements thereof, hereby revoking any proxies heretofore given.
THIS PROXY, WHEN EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" THE ELECTION OF THE DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS, "FOR"
THE 1997 STOCK OPTION PLAN, "FOR" THE NON-EMPLOYEE DIRECTOR STOCK PURCHASE
PLAN, AND "FOR" THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
CHANGE THE COMPANY'S NAME.
You are encouraged to specify your choices by marking the appropriate
box, SEE REVERSE SIDE, but you need not mark any box if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxies cannot vote
your shares unless you sign and return this card.
(TO BE SIGNED ON REVERSE SIDE.)
[X] Please mark your
votes as in this
example.
NOMINEES: Don D. Box
1. Election of FOR WITHHELD John E. Goble, Jr.
Directors [ ] [ ] William E. Greenwood
David H. Hawk
James Arthur Lyle
For, except vote withheld from the David E. Preng
following nominee(s): Thomas W. Rollins
Alan C. Shapiro
-------------------------------------- James A. Watt
--------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the proposed 1997 Stock [ ] [ ] [ ]
Option Plan.
3. Approval of the proposed Non-Employee [ ] [ ] [ ]
Director Stock Purchase Plan.
4. Approval of the Proposed amendment to the [ ] [ ] [ ]
Company's Certificate of Incorporation to
change the name of the Company to
"Remington Oil and Gas Corporation."
5. In their discretion, the Proxies are [ ] [ ] [ ]
authorized to vote as described in the
Proxy statement and upon such other
business as may properly come before
the meeting or any adjournments or
postponements thereof.
SIGNATURE(S) DATE , 1997
--------------------------------------- ------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
