UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-12396
THE BEARD COMPANY
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-0970298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ENTERPRISE PLAZA, SUITE 320
5600 NORTH MAY AVENUE
OKLAHOMA CITY, OKLAHOMA 73112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 842-2333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of March 31, 1997.
Common Stock $.001 par value - 2,799,074
<PAGE>
THE BEARD COMPANY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - March 31, 1997 (Unaudited) and December 31, 1996
Statements of Operations - Three Months ended March 31, 1997 and 1996
(Unaudited)
Statements of Shareholders' Equity, Year ended December 31, 1996
and Three Months ended March 31, 1997 (Unaudited)
Statements of Cash Flows - Three Months ended March 31, 1997 and 1996
(Unaudited)
Notes to Financial Statements (Unaudited)
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 2. Changes in Securities
ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
THE BEARD COMPANY AND SUBSIDIARIES
Financial Statements
March 31, 1997 (Unaudited) and December 31, 1996 and for the
Three Months Ended March 31, 1997, and 1996 (Unaudited)
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements
THE BEARD COMPANY AND SUBSIDIARIES
Balance Sheets
March 31, 1997 (Unaudited) and December 31, 1996
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1997 1996
--------------- -------------
<S> <C> <C>
Current assets:
- --------------
Cash and cash equivalents $ 240,000 $ 375,000
Accounts receivable, less allowance for
doubtful receivables of $72,000 in 1997
and $71,000 in 1996 2,396,000 2,405,000
Inventories 998,000 2,003,000
Prepaid expense 452,000 442,000
Other assets 72,000 73,000
--------------- --------------
Total current assets 4,158,000 5,298,000
---------------- --------------
Investments and other assets 1,679,000 1,710,000
Property, plant and equipment, at cost 17,239,000 16,793,000
Less accumulated depreciation,
depletion and amortization 8,416,000 8,094,000
--------------- --------------
Net property, plant and equipment 8,823,000 8,699,000
--------------- --------------
Intangible assets, at cost 4,330,000 4,305,000
Less accumulated amortization 3,571,000 3,539,000
--------------- --------------
Net intangible assets 759,000 766,000
--------------- --------------
$ 15,419,000 $ 16,473,000
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
- -------------------
Trade accounts payable $ 1,575,000 $ 1,395,000
Accrued expense and other liabilities 426,000 609,000
Short-term debt - 639,000
Current maturities of long-term debt 776,000 910,000
-------------- ---------------
Total current liabilities 2,777,000 3,553,000
-------------- ---------------
Long-term debt less current maturities 3,067,000 2,911,000
Minority interest in consolidated
subsidiaries 143,000 153,000
Redeemable preferred stock of $100 stated
value; 5,000,000 shares authorized;
90,156 shares issued and outstanding
(note 4) 1,200,000 1,200,000
Common shareholders' equity:
- ---------------------------
Common stock of $.001 par value per share;
10,000,000 shares authorized;
2,799,074 shares issued and outstanding
in 1997 and 1996 3,000 3,000
Capital in excess of par value 41,629,000 41,629,000
Accumulated deficit (33,400,000) (32,976,000)
--------------- --------------
Total common shareholders'
equity 8,232,000 8,656,000
--------------- --------------
Commitments and contingencies (note 8) $ 15,419,000 $ 16,473,000
=============== ==============
</TABLE>
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
---------------------------------
March 31, March 31,
1997 1996
------------ ------------
<S> <C> <C>
Revenues:
Carbon dioxide $ 2,918,000 $ 2,779,000
Environmental/resource recovery 1,169,000 350,000
Other 35,000 17,000
------------ ------------
4,122,000 3,146,000
Expenses:
Carbon dioxide 2,053,000 2,064,000
Environmental/resource recovery 995,000 527,000
Selling, general and administrative 1,031,000 947,000
Depreciation, depletion and
amortization 361,000 302,000
Other 7,000 14,000
------------ ------------
4,447,000 3,854,000
Operating profit(loss):
Carbon dioxide 79,000 (86,000)
Environmental/resource recovery (175,000) (353,000)
Other (229,000) (269,000)
------------ ------------
(325,000) (708,000)
Other income (expense):
Interest income 3,000 2,000
Interest expense (88,000) (46,000)
Gain on sale of assets 53,000 12,000
Gain on take-or-pay contract settlement
(note 6) - 939,000
Other, including equity in net loss
of unconsolidated affiliates (77,000) (96,000)
Minority interest in operations of
consolidated subsidiaries 10,000 -
------------ ------------
Earnings (loss) from continuing operations
before income taxes (424,000) 103,000
Income taxes (note 7) - -
------------ ------------
Earnings (loss) from continuing operations $ (424,000) $ 103,000
Loss from discontinued real
estate operations (note 2) - (8,000)
------------ ------------
Net earnings (loss) $ (424,000) $ 95,000
============ ============
Net earnings (loss) attributable to common
shareholders $ (424,000) 95,000
============ ============
Earnings (loss) per common share and
common equivalent share (primary EPS)
(note 5):
Earnings (loss) from continuing
operations $ (0.15) $ 0.03
Loss from discontinued operations - -
Net earnings (loss) $ (0.15) $ 0.03
See accompanying notes to financial statements.
</TABLE>
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Shareholders' Equity
<TABLE>
<CAPTION>
TOTAL
CAPITAL IN COMMON
COMMON EXCESS OF ACCUMULATED SHAREHOLDERS'
STOCK PAR VALUE DEFICIT EQUITY
---------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $ 3,000 $ 41,446,000 $ (32,661,000) $ 8,788,000
Net loss, year ended December 31, 1996 - - (315,000) (315,000)
Issuance of 68,244 shares of common stock - 183,000 - 183,000
---------- ------------- -------------- --------------
Balance, December 31, 1996 3,000 41,629,000 (32,976,000) 8,656,000
Net loss, three months ended March 31, 1997 - - (424,000) (424,000)
---------- ------------- -------------- --------------
Balance, March 31, 1997 $ 3,000 $ 41,629,000 $ (33,400,000) $ 8,232,000
========== ============= ============== ==============
</TABLE>
See accompanying notes to financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
-----------------------------------
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Operating activities:
Cash received from customers $ 5,332,000 $ 3,361,000
Cash paid to suppliers and employees (4,426,000) (3,812,000)
Cash received from settlement of
take-or-pay contract - 539,000
Interest received 3,000 1,000
Interest paid (136,000) (47,000)
----------- -----------
Net cash provided by operating
activities 773,000 42,000
----------- -----------
Investing Activities:
Acquisition of property, plant
and equipment (369,000) (341,000)
Proceeds from sale of assets 55,000 149,000
Other investments 16,000 (8,000)
----------- -----------
Net cash used in investing
activities (298,000) (200,000)
----------- -----------
Financing Activities:
Proceeds from line of credit and
term notes 985,000 1,085,000
Payments on line of credit and
short-term notes (1,595,000) (891,000)
Proceeds from issuance of stock - 10,000
----------- -----------
Net cash provided by (used in)
financing activities (610,000) 204,000
----------- -----------
Net increase (decrease) in cash and
cash equivalents (135,000) 46,000
Cash and cash equivalents at beginning
of period 375,000 220,000
----------- -----------
Cash and cash equivalents at end of
period $ 240,000 $ 266,000
=========== ===========
</TABLE>
Continued
THE BEARD COMPANY AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
Reconciliation of Net earnings (loss) to Net Cash Provided by Operating
- ----------------------------------------------------------------------
Activities
- ----------
<TABLE>
<CAPTION>
For the Three Months Ended
-----------------------------------
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Net earnings (loss) $ (424,000) $ 95,000
Adjustments to reconcile net earnings
(loss) to net cash provided by operating
activities:
Depreciation, depletion and amortization 361,000 303,000
Gain on sale of assets (53,000) (12,000)
Receipt of equipment as part of
settlement of take-or-pay contract - (400,000)
Interest and other costs (capitalized)
recognized on real estate project 464,000 (30,000)
Other, including minority interest in
consolidated subsidiaries 83,000 99,000
------------ -------------
Net cash provided by operations
before changes in current assets
and liabilities 431,000 55,000
(Increase) decrease in accounts
receivable, prepaids and other
current assets (3,000) 53,000
(Increase) decrease in inventories 541,000 (258,000)
Increase (decrease) in accounts
payable, accrued expenses and other
liabilities (196,000) 192,000
------------ -------------
Net cash provided by operating
activities $ 773,000 $ 42,000
============ =============
Supplemental Schedule of Noncash Investing and Financing Activities
- -------------------------------------------------------------------
Purchase of property, plant and equipment
and intangible assets through issuance
of debt obligations $ - $ 99,000
============ =============
Receipt of equipment as part of
settlement of take-or-pay contract $ - $ 400,000
============ =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE BEARD COMPANY AND SUBSIDIARIES
Notes to Financial Statements
March 31, 1997 and 1996
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements and notes thereto have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain footnote disclosures normally
prepared in accordance with generally accepted accounting principles have
been omitted. The accompanying consolidated financial statements and notes
thereto should be read in conjunction with the consolidated financial
statements and notes thereto included in Beard's 1996 annual report on Form
10K.
The accompanying consolidated financial statements include the accounts of
The Beard Company and its wholly and majority-owned subsidiaries ("Beard or
the Company"). All significant intercompany transactions have been
eliminated.
The financial information included herein is unaudited; however, such
information reflects all adjustments which are, in the opinion of manage-
ment, necessary for a fair statement of the results for the interim periods
presented.
The results of operations for the three-month period ended March 31, 1997,
are not necessarily indicative of the results to be expected for the full
year.
The Company operates within two major industry segments: (1) the carbon
dioxide ("CO2") segment, comprised of (a) the manufacture and distribution
of dry ice (solid CO2) and (b) the production of CO2; and (2) the en-
vironmental/resource recovery ("E/RR") segment, consisting of environmental
services and resource recovery activities. The Company also operated
in the real estate ("R/E") segment, consisting of real estate construction
and development, which was discontinued in January, 1997. The Company also
has other operations, including a minority-owned investment in a joint
venture for the extraction, production and sale of crude iodine.
(2) DISCONTINUED OPERATIONS
In January 1997, the Company approved a formal plan to dispose of the assets
of its R/E segment. The Company estimated that it would incur a loss of
$180,000 from discontinuing real estate construction and development
activities. The loss was recorded in the fourth quarter of 1996 and
represented the difference in the estimated amounts to be received from
disposing of the real estate construction and development assets and the
asset's recorded values as of December 31, 1996.
Results of operations of the R/E segment for the three months ended March
31, 1996, have been restated as discontinued operations in the accompanying
statements of operations. Operating results of the discontinued operations
through the date of sale of all remaining assets are not expected to be
significant.
During the three months ended March 31, 1997, the Company disposed of real
estate construction and development assets for $1,196,000 which approximated
the Company's estimated disposition values of these assets.
As of March 31, 1997, the significant assets of the R/E segment included two
speculative homes valued at approximately $574,000.
(3) ACQUISITION
On May 21, 1996, the Company acquired 80% of the outstanding common stock of
Horizontal Drilling Technologies, Inc. ("HDT") for $482,000. HDT utilizes
trenchless technology and specializes in directional drilling for utility,
underground cable and environmental remediation projects. The purchase
price consisted of a non-interest bearing contingent payment obligation, a
non-interest bearing $150,000 note, convertible at the option of the holder
into common stock of the Company, and 20% of the Company's ownership in an
existing subsidiary involved in environmental/resource recovery operations.
The contingent payment obligation is payable only from 80% of specified cash
flows of HDT and the existing environmental/resource recovery subsidiary and
was recorded based upon its estimated present value. The non-interest
bearing note was also recorded at its present value and was converted into
the Company's common stock subsequent to the acquisition. The fair value of
the net identifiable assets of HDT approximated $143,000 on the acquisition
date. The excess of the purchase price over the fair value of the net
identifiable assets acquired has been recorded as goodwill and is being
amortized on a straight-line basis over ten years. The acquisition has been
accounted for by the purchase method and accordingly, the results of
operations of HDT prior to May 21, 1996, are not included in the Company's
consolidated financial statements.
(4) REDEEMABLE PREFERRED STOCK
The Company's preferred stock is mandatorily redeemable through December 31,
2002, from one-third of Beard's "consolidated net income" as defined. The
Company's operations through March 31, 1997, were not sufficient to begin
the sharing of the consolidated net income. Accordingly, one-third of
future "consolidated net income" will accrete directly to preferred
stockholders and reduce earnings per common share. To the extent that the
preferred stock is not redeemed by December 31, 2002, the shares of
preferred stock can be converted into shares of the Company's common stock.
(5) EARNINGS (LOSS) PER SHARE
Loss per common share for the three-month period ended March 31, 1997, has
been computed by dividing the loss by the weighted average number of common
shares outstanding during the quarter. Common share equivalents and any
potentially dilutive securities outstanding were not considered in the March
31, 1997, calculations, as the effects would have been antidilutive.
Primary earnings per common share for the three-month period ended March 31,
1996, were computed by dividing net earnings available to common
shareholders by the weighted average number of shares of common stock and
common stock equivalents outstanding during the period. Common stock
equivalents include the effect of shares issuable upon exercise of incentive
and non-qualified stock options using the treasury stock method. Fully
diluted earnings per share include the potential dilution of the earnings
available to common stockholders as if the preferred stock was converted to
common stock. The calculation includes the weighted average number of
shares of common shares outstanding, the common stock equivalents, and the
common shares that would result from the conversion of the preferred shares.
The table on the following page contains the components of the common share
and common equivalent share amounts used in the calculation of earnings
(loss) per share in the Company's statement of operations:
THE BEARD COMPANY AND SUBSIDIARIES
Notes to Financial Statements
March 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------------
March 31, March 31,
1997 1996
--------- ---------
<S> <C> <C>
Primary EPS:
Weighted average of common
shares outstanding 2,799,074 2,734,094
Options considered to be
common stock equivalents - 17,752
--------- ---------
2,799,074 2,751,846
========= =========
</TABLE>
(6) SETTLEMENT OF TAKE-OR-PAY CONTRACT
In February 1996, the Company negotiated a settlement of a take-or-pay con-
tract under which a customer was obligated to purchase certain volumes of
liquid CO2. As a result of the settlement, the Company received $539,000
of cash and assets with an estimated fair value of $400,000 and the Company
released the party of its contractual obligation to purchase the contracted
liquid CO2 volumes. The Company realized a gain of $939,000 related to this
settlement.
(7) INCOME TAXES
In accordance with the provisions of the Statement of Financial Accounting
Standard No. 109, Accounting for Income Taxes ("SFAS No. 109"), the
Company's net deferred tax asset is being carried at zero book value, which
reflects the uncertainties of the Company's utilization of the net
deductible timing differences. There is no provision for income taxes in
1997 or 1996 due to the availability of net operating losses and other
carryforwards.
At March 31, 1997, the Company estimates that it had the following income
tax carryforwards available for both income tax and financial reporting
purposes (in thousands):
<TABLE>
<CAPTION>
Expiration
Date Amount
---------- ----------
<S> <C> <C>
Federal regular tax operating loss carry-
forwards 2001-2011 $ 67,388
Investment tax credit carryforward 1997-2000 679
Tax depletion carryforward Indefinite 5,500
---------- ----------
Total $ 73,567
==========
</TABLE>
(8) COMMITMENTS AND CONTINGENCIES
In the normal course of business various actions and claims have
been brought or asserted against the Company. Management does not
consider them to be material to the Company's financial position,
liquidity or results of operations.
(9) CHANGE IN CONTROL COMPENSATION AGREEMENTS
In January 1997, the Company's dry ice subsidiary entered into Change of
Control Compensation agreements with its President and two other employees.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion focuses on material changes in the
Company's financial condition since December 31, 1996 and results of opera-
tions for the quarter ended March 31, 1997 compared to the prior year
first quarter. Such discussion should be read in conjunction with
the Company's financial statements including the related footnotes.
In preparing the discussion and analysis, the Company has presumed
readers have read or have access to the discussion and analysis of the
prior year's results of operations, liquidity and capital resources
as contained in the Company's 1996 Form 10-K.
The Company operates within two major industry Segments: (1) the
carbon dioxide ("CO2") Segment, comprised of (a) the manufacture and
distribution of dry ice (solid CO2) and (b) the production of CO2; and
(2) the environmental/resource recovery ("E/RR") Segment, consisting of
environmental services and resource recovery activities. The Company also
has other operations, including (i) a minority-owned investment in a joint
venture for the extraction, production and sale of crude iodine, and
(ii) various assets and investments which the Company has been liquidating
as opportunities have materialized, including the assets of the
Company's former real estate construction and development ("R/E")
Segment, the operations of which were discontinued in January, 1997.
(See Note 2 to the Financial Statements).
MATERIAL CHANGES IN FINANCIAL CONDITION - MARCH 31, 1997 AS COMPARED WITH
DECEMBER 31, 1996.
The following table reflects some of the changes in the Company's financial
condition during the periods indicated:
<TABLE>
<CAPTION>
March 31, December 31, Increase
1997 1996 (Decrease)
--------- ------------ --------
<S> <C> <C> <C>
Cash and cash equivalents $ 240,000 $ 375,000 $(135,000)
Working capital $1,381,000 $1,745,000 $(364,000)
Current ratio 1.50 to 1 1.49 to 1
</TABLE>
The Company's ability to generate working capital from operations during the
first quarter of 1997 was adversely affected by operating losses from the E/RR
Segment and the low sales volumes of the CO2 Segment. The Company's core
operations are affected by seasonality. The first quarter is normally a poor
one for the dry ice business, and cold and/or rainy weather also normally
causes a slowdown of sales in the environmental/resource recovery
Segment. As previously mentioned, the Company has discontinued the R/E Segment
and the sale of substantially all of its assets in this Segment during the
quarter provided cash of $996,000 and working capital of $220,000. The
proceeds from the sale were used to pay down the short-term debt associated
with the construction cost of these assets. Despite the seasonal decline,
however, net working capital generated by operations for the first three months
of 1997 amounted to $431,000, a strong improvement over the $55,000 generated in
the 1996 quarter.
In addition to the proceeds from the sale of assets in the R/E Segment, the
Company has been able to satisfy its liquidity needs through its working
capital and borrowing arrangements. Future cash flows and availability of
credit are subject to a number of variables, including the price and demand for
dry ice, a continuing source of economical CO2, and continuing private and
governmental demand for environmental services. Despite these uncertainties,
the Company anticipates that its cash flow from operations and continuing
availability of credit on a basis similar to that experienced to date will be
sufficient to meet its planned operating costs and capital spending require-
ments.
Additional capital expenditures of $369,000 were made by the following
Segments in property, plant and equipment during the first three months of
1997:
<TABLE>
<CAPTION>
<S> <C>
Carbon dioxide $272,000
Environmental/resource recovery 59,000
Other 38,000
--------
$369,000
========
</TABLE>
The CO2 Segment's line of credit will be sufficient to fund its presently
foreseeable capital expenditure requirements, including the $713,000 projected
for the last nine months of 1997. The Company's other credit lines and cash
flow will be adequate to fund the $449,000 of capital expenditures projected for
the rest of the Company for the last nine months of the year.
Through the period ending December 31, 2002, the Company's liquidity will
be reduced to the extent it is required to redeem any of the Beard preferred
stock pursuant to the mandatory redemption provisions. See Note 2 to the
accompanying financial statements.
MATERIAL CHANGES IN RESULTS OF OPERATIONS - QUARTER ENDED MARCH 31, 1997 AS
COMPARED WITH THE QUARTER ENDED MARCH 31, 1996.
The loss for the first quarter of 1997 was $424,000, compared to earnings
of $95,000 for the same time period in 1996. There was a significant
improvement in operating margins across the board; the CO2 Segment improved by
$165,000, the E/RR Segment by $178,000, and Other by $40,000. As a
result, the operating loss for the current quarter decreased 54% to $325,000
versus $708,000 a year ago. The first quarter of 1996 was favorably
impacted by a $939,000 gain from the settlement of a take-or-pay contract in
the CO2 Segment.
Operating results of the Company's two Segments are reflected below:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
OPERATING PROFIT (LOSS):
Carbon dioxide $79,000 $(86,000)
Environmental/resource
recovery (175,000) (353,000)
---------- ----------
Subtotal (96,000) (439,000)
Other (229,000) (269,000)
---------- ----------
(325,000) (708,000)
========== ==========
</TABLE>
The "Other" in the above table reflects primarily general and corporate
activities, as well as other activities and investments of the Company.
CARBON DIOXIDE
First quarter 1997 operations reflected an operating profit of $79,000
compared to an $86,000 loss for the 1996 first quarter. The primary component
of revenues for this Segment is dry ice sales which are seasonal with the
downturn occurring from December through February, while the brisk sales period
occurs from June through August and then again in October. The operating loss
for the dry ice component of this Segment decreased to $6,000 in 1997 from
$141,000 in 1996 as a result of increased sales and lower operating costs.
Revenues from this Segment totaled $2,918,000 for the 1997 first quarter, a
5% increase over last year's first quarter. The factors contributing to this
improvement included increases in the volume of dry ice sales, in the sales of
equipment, and in the Company's allocated share of sales from its working
interest in a producing CO2 unit. This improvement in revenues was par-
tially offset by increases in expenses associated with advertising and sales,
insurance, and an incentive-sales arrangement for employees.
ENVIRONMENTAL/RESOURCE RECOVERY
A significant increase in revenues generated by the E/RR Segment led to a
sharply reduced operating loss by this Segment in the first quarter of 1997 as
compared to the same period in 1996. This increase in revenue was primarily
caused by an increase in environmental services activity and the operation of
the Horizontal Drilling rigs acquired in the acquisition of Horizontal Drilling
Technologies, Inc. ("HDT") in May, 1996 (see Note 3 to the Financial
Statements). This increase was offset somewhat, however, by a decline in the
revenues generated by resource recovery activities due to the completion in
February 1996 of a contract with the U. S. Department of Energy related to the
Company's patented Mulled Coal technology. Management has been pursuing and
will continue to pursue the commercial development of this technology during
the remainder of 1997.
OTHER ACTIVITIES
Other operations, consisting primarily of general and corporate
activities, generated a slightly smaller operating loss for the first quarter
of 1997 as compared to the same period last year. A slight decrease in the
revenues generated by the corporate group was more than offset by a larger
decrease in corporate overhead expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company's selling, general and administrative expenses ("SG&A") in the
current quarter increased to $1,031,000 from $947,000 in the 1996 first
quarter. This resulted primarily from an increase in the SG&A of the E/RR
Segment as a result of including the operations of HDT (see Note 3 to the
Financial Statements) which added $94,000 to SG&A.
DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSES
The first quarter of 1997 had a minor increase in DD&A expense of $59,000,
reflecting additions to property, plant and equipment made during the past
year.
OTHER INCOME AND EXPENSES
The other income and expenses for the first quarter of 1997 netted to a
$99,000 loss compared to $811,000 net income for the same period in 1996. As
previously mentioned, the Company benefited in the first quarter of 1996 from
the settlement of a take-or-pay contract in the CO2 Segment. This settle-
ment resulted in a gain of $939,000. The Company realized a gain of
$53,000 on the sale of assets during the first quarter of 1997 compared to
$12,000 for the same period in 1996.
DISCONTINUED OPERATIONS
As previously noted, the Company discontinued its real estate construction
and development activities in January of 1997 in order to focus its attention
on other segments which are considered to have greater potential for growth and
profitability. As discussed in Note 2 to the Financial Statements, the Company
recognized the estimated loss of disposing of the R/E Segment's assets in the
fourth quarter of 1996. In the first quarter of 1997, the Company sold all of
the R/E Segment's assets, except for two completed speculative homes, for
$1,196,000. One of these homes is under contract for closing on May 30, 1997.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share."
SFAS No. 128 is effective for financial statements issued for periods ending
after December 15, 1997, and restatement of prior-period earnings per share
data is required. The new standard will not apply to Beard's financial
statements until the fourth quarter of 1997. SFAS No. 128 revises the current
calculation methods and presentation of primary and fully diluted earnings per
share. Beard has reviewed the requirements of SFAS No. 128 and has concluded
that they will not have a material effect on the calculation of Beard's
historical earnings (loss) per share data.
PART II. OTHER INFORMATION.
ITEM 2. CHANGES IN SECURITIES.
The Company's preferred stock is mandatorily redeemable through December 31,
2002 from one-third of Beard's "consolidated net income" as defined in the
Stock Purchase Agreement. Accordingly, one-third of future "consolidated net
income" will accrete directly to preferred stockholders and reduce earnings per
common share. As a result of these redemption requirements, the payment of any
dividends to the common stockholders in the near future is very unlikely. See
Note 2 to the accompanying financial statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following exhibits are filed with this Form 10-Q and are identified
by the numbers indicated:
4 Promissory Note from Registrant to the Trustees of the William M.
Beard and Lu Beard 1988 Charitable Unitrust, dated March 7, 1997.
10 Form of Change in Control Compensation Agreement dated as of
January 24, 1997, by and between Carbonic Reserves and three em-
ployees.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the period covered by this
report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
(Registrant) THE BEARD COMPANY
HERB MEE, JR.
(Date) May 13, 1997 Herb Mee, Jr., President and
Chief Financial Officer
JACK A. MARTINE
(Date) May 13, 1997 Jack A. Martine, Controller and
Chief Accounting Officer
<PAGE>
THE BEARD COMPANY AND SUBSIDIARIES
EXHIBIT INDEX
Forming a part of Form 10-Q Quarterly Report
to the U.S. Securities and Exchange Commission
<TABLE>
<CAPTION>
Exhibit
Number Brief Description Method of filing
- ------- ----------------- ----------------
<S> <C> <C>
4 Promissory Note from Registrant
to the Trustees of the William M.
Beard and Lu Beard 1988 Charitable
Unitrust, dated March 7, 1997 Filed herewith electronically
10 Form of Change of Control Com-
pensation Agreement dated as of
January 24, 1997, by and between
Carbonic Reserves and three
employees Filed herewith electronically
27 Financial Data Schedule Filed herewith electronically
</TABLE>
PROMISSORY NOTE
$500,000.00 Oklahoma City, Oklahoma
March 7, 1997
For value received, the undersigned, The Beard Company, an Oklahoma
corporation (the "Maker"), agrees to all of the terms of this Promissory Note
(this "Note") and promises to pay to the order of William M. Beard and Lu Beard
as Trustees of the William M. Beard and Lu Beard 1988 Charitable Unittrust
(individually and collectively called the "Holder"), at Enterprise Plaza, Suite
320, 5600 N. May, Oklahoma City, Oklahoma 73112, or at such other place as may
be designated in writing by the Holder of this Note, the principal sum of Five
Hundred Thousand Dollars ($500,000.00) or, if less than such amount, the
aggregate unpaid principal amount of all advances or loans made by the Holder
to the Maker, and all interest accruing thereon. This Note will be payable as
follows:
Interest will accrue on the unpaid principal balance of this Note
at the per annum interest rate of ten percent (10%) (the "Applicable
Rate"). Interest will commence to accrue on the date thereof and there-
after until this Note is paid in full. Interest will be computed for the
actual number of days elapsed at a per diem charge based on a year
consisting of three hundred sixty (360) days. All obligations evidenced
by and owing pursuant to the terms of this Note, including princi-
pal and interest, are due and payable March 7, 1999.
Both principal and interest owing pursuant to the terms of this Note
are payable in the lawful currency of the United States of America and in
immediately available funds. The Holder may disburse the principal of this
Note to the Maker in one or more advances or loans as determined by the
Holder in his sole discretion. All payments made on this Note will be
applied to this Note when received by the Holder hereof in collected funds.
Any sum not paid when due will bear interest at the rate equal to the
Applicable Rate plus five percent (5%) and will be paid at the time of, and
as a condition precedent to, the curing of any "Default", as that term is
hereinafter defined in this Note. During the existence of any Default, the
Holder of this Note may apply payments received on any amount due hereunder
or under the terms of any instrument hereafter evidencing or securing said
indebtedness as the Holder may determine.
The Maker agrees that if, and as often as, this Note is placed in the
hands of an attorney for collection or to defend or enforce any of the
Holder's rights hereunder, the Maker will pay to the Holder all reasonable
attorney's fees and all expenses incurred by the Holder in connection
therewith.
HMJR
THIS NOTE IS GIVEN BY THE MAKER AND ACCEPTED BY THE HOLDER PURSUANT TO
A LENDING TRANSACTION CONTRACTED, CONSUMMATED, AND TO BE PERFORMED IN
OKLAHOMA CITY, OKLAHOMA COUNTY, OKLAHOMA, AND THIS NOTE SHALL BE CONSTRUED
ACCORDING TO THE LAWS OF THE STATE OF OKLAHOMA. The payment of all
indebtedness evidenced by this Note is unsecured. However, in the event of
any Default, the Holder may request, and the Maker agrees to furnish to the
Holder, agreeable collateral and such security agreements as the Maker may
reasonably require to secure the indebtedness.
At the option of the Holder, the unpaid balance of this Note, and all
other obligations of the Maker to the Holder, whether direct or indirect,
absolute or contingent, now existing or hereafter arising, shall become
immediately due and payable without presentment, protest, notice or demand
upon the occurrence or existence of one or more of the following events or
conditions ("Default"):
1. any payment required by this Note or any other note or obligation
of the Maker to the Holder or to others is not made when due in the amount
required; and
2. any default or breach occurs in the performance of any covenant,
obligation, representation, warranty, or provision contained in this Note
or in any other note or obligation of the Maker to Holder or to others;
No waiver of any payment or other right under this Note by the Holder
shall operate as a waiver of any other payment or right. Any payments
hereunder may, at the option of the Holder, be recorded on this Note and
shall be prima facie evidence of such payments and the unpaid balance of
this Note.
The Maker has the right to prepay this Note in whole or in part at any
time and from time to time without premium or penalty, but with accrued
interest to the date of the prepayment on the amount prepaid.
The Maker waives presentment for payment, protest and notice of
nonpayment.
IN WITNESS WHEREOF, the Maker has executed this instrument effective
on the date first above written.
ATTEST: THE BEARD COMPANY
REBECCA G. WITCHER HERB MEE, JR.
Rebecca G. Witcher, Secretary Herb Mee, Jr., President
HMJR
CARBONIC RESERVES
CHANGE IN CONTROL COMPENSATION AGREEMENT
This Agreement, dated as of the 24th day of January, 1997, between
CARBONIC RESERVES, ("CARBONIC"), a Nevada Corporation having its principal
place of business at 10110 Huebner Road, San Antonio, Texas, 78240 and CLIFFORD
H. COLLEN, JR. ("COLLEN"), who resides at 36 Old San Antonio Road, Boerne,
Texas 78006.
The Board of Directors of CARBONIC has considered, and the Board of
Directors has approved, that CARBONIC enter into agreements, providing for
compensation under certain circumstances after a change in control, with key
executives of CARBONIC and its subsidiaries.
COLLEN is a key executive of CARBONIC and has been selected by the Board
of Directors to enter into this Agreement;
Should CARBONIC become subject to any proposed or threatened Change in
Control (as defined below), the Board of Directors of CARBONIC believes it
imperative that CARBONIC and the Board of Directors be able to rely upon COLLEN
to continue in his position, and that CARBONIC be able to receive and rely upon
his advice, if requested, as to the best interests of CARBONIC and its
stockholders without concern that he might be distracted by the personal
uncertainties and risks created by such a proposal or threat; and
Should CARBONIC receive any such proposal, in addition to COLLEN's
regular duties, he may be called upon to assist in the assessment of such
proposals, advise management and the Board of Directors as to whether such
proposal would be in the best interests of CARBONIC and its stockholders and to
take such other actions above and beyond his regular duties as the Board might
determine to be appropriate;
NOW, THEREFORE, to assure CARBONIC that it will have the continued
dedication of COLLEN and the availability of his advice and counsel
notwithstanding the possibility, threat or occurrence of an effort to take over
control of CARBONIC and for other good and valuable consideration, CARBONIC and
COLLEN agree as follows:
1. SERVICES DURING CERTAIN EVENTS. In the event a third person,
persons or entity begins a tender or exchange offer, circulates a proxy to
stockholders, or takes other steps to effect a Change in Control (as defined
below), COLLEN agrees that he will not voluntarily leave the employ of CARBONIC
or the subsidiary then employing him on less than three months written notice
to the Chairman of the Board of CARBONIC, and will render the services expected
of his position, and will act in all things related to the benefit of the
shareholders of CARBONIC, until the third person, persons or entity has
abandoned or terminated his/its efforts to effect a Change in Control or until
a Change in Control has occurred.
2. TERMINATION FOLLOWING CHANGE IN CONTROL. Except as provided in
Section 4 here, CARBONIC will provide or cause to be provided to COLLEN the
rights and benefits described in Section 3 here in the event that COLLEN's
employment is terminated at any time within three years following a Change in
Control (as such term is defined in this Section 2) under the circumstances
stated in (a) or (b) below.
(a) by CARBONIC or the subsidiary employing COLLEN for reasons other
than for "cause" (as such term is defined in Section 4 here) or other than as a
consequence of COLLEN's death or attainment of the normal retirement date as
provided under CARBONIC's 401K Plan (the "Retirement Plan") as in effect
immediately preceding such date ("Normal Retirement Date"); or
(b) by COLLEN following the occurrence of any of the following events:
(i) the assignment of COLLEN to any duties or responsibilities that are
inconsistent with his position, duties, responsibilities or status
immediately preceding such Change in Control, or a change in his
reporting responsibilities or titles in effect at such time
resulting in a reduction of his responsibilities or position;
(ii) the reduction of COLLEN's annual salary (including any deferred
portions of it) or level of benefits or supplemental compensation;
(iii)the transfer of COLLEN to a location requiring a change in his
residence;
(iv) a transfer of COLLEN resulting in a material increase in the amount
of travel normally required of COLLEN in connection with his
employment; or
(v) the good faith determination by COLLEN that due to the Change in
Control (including any changes in circumstances at CARBONIC that
directly or indirectly effect COLLEN's position, duties,
responsibilities or status immediately preceding such Change in
Control) he is no longer able to effectively discharge his duties
and responsibilities.
(vi) upon COLLEN's disability or whenever the continued performance of
COLLEN's duties would become hazardous to his health. Under the
latter circumstance, as a condition to termination, COLLEN must
furnish CARBONIC with a physician's written statement that COLLEN's
continued employment is impossible or otherwise hazardous to his
health. That statement must be independently verified by a
physician selected by CARBONIC before COLLEN may terminate his
employment for reasons of health or disability.
If a Change in Control shall occur prior to or during any renewal term,
as set forth in Section 6 herein, COLLEN shall be entitled to the rights and
benefits provided for in this Section 2 notwithstanding any other provisions to
the contrary in this Agreement.
For purposes of this Agreement, the term "Change in Control" is defined
to include: (a) a tender offer or exchange offer made and consummated for
ownership of CARBONIC stock representing 50% or more of the combined voting
power of CARBONIC's outstanding securities; (b) the sale or transfer of
substantially all of CARBONIC's assets to another corporation which is not a
wholly-owned subsidiary of CARBONIC; (c) any transaction relating to CARBONIC
which must be described in accordance with item 5(f) of Schedule 14A of
Regulation 14A of the Securities and Exchange Commission; (d) any merger or
consolidation of CARBONIC with another corporation, where less than 50% of the
outstanding voting shares of the surviving or resulting corporation are owned
in the aggregate by CARBONIC's former stockholders; or (e) any tender offer,
exchange offer, merger, sale of assets and/or contested election which results
in a change of more than 50% in the composition of CARBONIC's Board of
Directors.
3. RIGHTS AND BENEFITS UPON TERMINATION. In the event of the
termination of COLLEN's employment under any of the circumstances set forth in
Section 2 hereof ("Termination"), CARBONIC agrees to provide or cause to be
provided to COLLEN the following rights and benefits:
(a) SALARY AND OTHER PAYMENTS AT TERMINATION. COLLEN shall be entitled
to receive his full compensation through the date of termination as well as any
severance benefits otherwise existing under the terms of his employment
agreement with CARBONIC, subject however to any reduction or forfeiture of
those benefits as provided below to ensure that there are no tax penalties
imposed on the amounts received. Additionally, COLLEN will be entitled to
receive payment in cash in the amount of 2.99 times COLLEN's average Annual
Earnings (as such term is defined in this Section 3(a)), which for purposes of
this Agreement shall be deemed to be the "base amount" as that term is defined
in Section 280G of the Internal Revenue Code of 1986, as amended during the
most recent five-year fiscal periods (or the period during which the COLLEN has
been employed by CARBONIC or any of its subsidiaries if less than five years).
However, if such amount exceeds limits provided in the then existing provisions
of the Internal Revenue Code for the imposition of tax penalties on such
payments, the amount shall be reduced to the highest amount allowed to avoid
such penalties. At the election of COLLEN, payment shall be made in equal
monthly payments over a three-year period beginning with the month following
Termination, or payment shall be made in a lump sum. Any lump sum payment
request must be made in writing within 10 days of Termination and shall be paid
to COLLEN within 30 days of Termination.
If COLLEN shall die prior to the time all payments which may otherwise
have been due to COLLEN, under this Section 3(a) or otherwise in this
agreement, have been made, then as soon as practicable after such death but in
no event later than three months thereafter, CARBONIC shall pay in a lump sum
in cash all sums not distributed to COLLEN prior to his death. Payment shall
be made to the beneficiary named as such under the Life Insurance Plan
maintained by CARBONIC on the date of COLLEN's death. If no such beneficiary
is named, such sums shall be paid to COLLEN's estate. No reduction to present
value of any such sums shall be made.
For purposes of this Agreement, "Annual Earnings" shall mean the amounts
earned by COLLEN for personal service rendered to CARBONIC and its
subsidiaries, as reportable on Treasury Department Form W-2, including
overtime, bonuses and commissions, and excluding the following: (1) moving and
educational expenses, (2) income included under Section 79 of the Internal
Revenue Code of 1986, as amended and (3) income imputed to COLLEN from personal
use of employer owned automobiles. Earnings shall not include any income
attributable to grants of and dividends on shares awarded (whether as options,
restricted stock or any other form) under any Stock Option Plan or Incentive
Stock Option Plan.
(b) RETIREMENT PLAN BENEFITS. Except to the extent expressly prohibited
by any applicable law or regulation, any and all restrictions, vesting
schedules or schedule of exercise provided in the CARBONIC Retirement Plan (or
any successor to it) shall immediately lapse and COLLEN shall be entitled
immediately to receive all benefits previously granted him under that plan.
(c) INCENTIVE PLAN BENEFITS. An award under any Incentive Plan for a
prior Plan Year which has not been paid to COLLEN at the time of his
Termination shall be paid to him within 30 days of his Termination.
(d) INSURANCE AND OTHER SPECIAL BENEFITS. Until COLLEN's Normal
Retirement Date, (as defined in paragraph 2(a) above, COLLEN shall continue to
be covered by the life insurance, medical insurance, and accident and
disability insurance plans of CARBONIC and its subsidiaries or any successor
plan or program in effect at or after Termination for employees in the same
class or category as was COLLEN prior to his Termination, subject to the terms
of such plans and to COLLEN's making any payments therefor required of
employees in the same class or category as was COLLEN prior to his Termination.
In the event COLLEN is ineligible to continue to be so covered under the terms
of any such benefit plan or program, or, in the event COLLEN is eligible but
the benefits applicable to COLLEN under any such plan or program after
Termination are not substantially equivalent to the benefits applicable to
COLLEN immediately prior to Termination, then, until COLLEN's Normal Retirement
Date, CARBONIC shall provide such substantially equivalent benefits, or such
additional benefits as may be necessary to make the benefits applicable to
COLLEN substantially equivalent to those in effect before Termination, through
other sources; PROVIDED, HOWEVER, that if during such period COLLEN should
enter into the employ of another company or firm which provides substantially
similar insurance benefit coverage, COLLEN's participation in the comparable
benefit provided by CARBONIC either directly or through such other sources
shall cease. Nothing contained in this paragraph shall be deemed to require or
permit termination or restriction of any COLLEN's coverage under any plan or
program of CARBONIC, or any of its subsidiaries or any successor plan or
program thereto to which COLLEN is entitled under the terms of such plan or
program thereto to which COLLEN is entitled under the terms of such plan or
program.
(e) OWNERSHIP OF PERQUISITES. The ownership of COLLEN's company owned
automobile shall be transferred, at book value, to him within 30 days of his
Termination, if he so desires.
(f) RELOCATION BENEFITS. If COLLEN has moved his residence to a
different city at the request of CARBONIC or any of its subsidiaries within 24
months before or after a Change in Control but before Executive's Termination,
CARBONIC shall provide all benefits available to employees in the class or
category as was COLLEN prior to his Termination under CARBONIC's relocation
policy as in effect immediately prior to the Change in Control, to relocate
COLLEN and his family to any city of COLLEN's choice within the United States.
COLLEN must request this benefit within 12 months of his Termination.
(g) OTHER BENEFIT PLANS. The specific arrangements referred to in this
Section 3 are not intended to exclude COLLEN's participation in other benefit
plans in which COLLEN currently participates or which are or may become
available to executive personnel generally in the class or category of COLLEN
or to preclude other compensation or benefits as may be authorized by the Board
of Directors from time to time.
(h) NO DUTY TO MITIGATE. COLLEN's entitlement to benefits under this
plan shall not be governed by any duty to mitigate his damages by seeking
further employment nor offset by any compensation which he may receive from
future employment.
(i) PAYMENT OBLIGATIONS ABSOLUTE. Unless Section 4 is applicable,
CARBONIC's obligation to pay or cause to be paid to COLLEN the benefits and to
make the arrangements provided in this Section 3 shall be absolute and
unconditional and shall not be affected by any circumstances, including without
limitation, any set off, counterclaim, recoupment, defense or other right,
which CARBONIC may have against him or anyone else. All amounts payable by or
on behalf of CARBONIC under this agreement shall, unless specifically stated to
the contrary in this agreement, be paid without notice or demand. Each and
every payment made hereunder by or on behalf of CARBONIC shall be final and
CARBONIC and its subsidiaries shall not, for any reason whatsoever, seek to
recover all or any part of such payment from COLLEN or from whomever shall be
entitled thereto.
4. CONDITIONS TO THE OBLIGATIONS OF CARBONIC. CARBONIC shall have no
obligation to provide or cause to be provided to COLLEN the rights and benefits
described in Section 3 hereof if either of the following events shall occur:
(a) TERMINATION FOR CAUSE. CARBONIC shall terminate COLLEN's employment
for "cause." For purposes of this Agreement, termination of employment for
"cause" shall mean termination for conviction of a felony directly related to
the performance of his duties as an employee of CARBONIC.
(b) RESIGNATION AS DIRECTOR OR OFFICER. COLLEN shall fail, within
thirty (30) days after receiving notice to do so after Termination, to resign
as a director and/or officer of CARBONIC and each subsidiary and affiliate of
CARBONIC of which he is then serving as a director and/or officer.
5. CONFIDENTIALITY; NON-SOLICITATION; COOPERATION; CONSULTANCY.
(a) CONFIDENTIALITY. COLLEN agrees that at all times following
Termination, he will not, without the prior written consent of CARBONIC
disclose to any person, firm or corporation any confidential information of
CARBONIC or its subsidiaries which is known to him or which hereafter (whether
before or after his Termination) may become known to him as a result of his
employment or association with CARBONIC and which could be helpful to a
competitor; provided, however, that the foregoing shall not apply to
confidential information that becomes publicly disseminated by means other than
a breach of this Agreement.
(b) COOPERATION. COLLEN agrees that, at all times following
Termination, he will furnish such information and render such assistance and
cooperation as may reasonably be requested in connection with any litigation or
legal proceedings concerning CARBONIC or any of its subsidiaries (other than
any legal proceedings concerning COLLEN's employment). In connection with such
cooperation, CARBONIC will pay or reimburse COLLEN for all reasonable expenses
incurred in cooperating with such requests.
(c) CONSULTATION. COLLEN agrees that for a period of two (2) years
following the date of Termination he will make himself available to CARBONIC
and its subsidiaries for consultation with senior officers of CARBONIC or of
its subsidiaries, as the case may be; provided, however, that COLLEN shall not
be required to perform consulting services (i) for more than five days in any
month and (ii) for more than 30 hours in any month. It is expressly agreed
that COLLEN's consulting services will be required at such time and such places
as will result in the least inconvenience to and not impose a hardship on
COLLEN to honor such other commitments prior to his rendering services under
this agreement. It is further agreed that COLLEN's consulting services shall
be rendered by personal consultation at COLLEN's principal residence or office,
wherever maintained, or by correspondence through mail, telephone or telegraph
or other similar modes of communications at times, including weekends and
evenings, most convenient to COLLEN. CARBONIC and COLLEN agree that if during
such period, COLLEN should enter into the full-time employ of another company
or firm, COLLEN shall not be required to consult at times or on matters that
will conflict with his responsibilities with respect to such employment.
COLLEN will be paid by CARBONIC reasonable compensation and all reasonable
expenses for such consulting services. The failure of CARBONIC and COLLEN to
agree on the compensation and/or expenses to be paid to COLLEN by CARBONIC or
its subsidiaries, shall be cause for COLLEN to discontinue his consultation
services.
(d) REMEDIES FOR BREACH. It is recognized that damages in the event of
breach of this Section 5 by COLLEN would be difficult, if not impossible, to
ascertain, and it is therefore agreed that CARBONIC in addition to and without
limiting any other remedy or right it may have shall have the right to an
injunction or other equitable relief in any court of competent jurisdiction,
enjoining any such breach, and COLLEN here waives any and all defenses he may
have on the ground of lack of jurisdiction or competence of the court to grant
such an injunction or other equitable relief. The existence of this right
shall not preclude CARBONIC from pursuing any other rights and remedies at law
or in equity which CARBONIC may have.
6. TERM OF AGREEMENT. Subject to Section 2 hereof, this Agreement
shall terminate on December 31, 1999; provided, however, that this Agreement
shall automatically renew for successive one-year terms unless CARBONIC
notifies COLLEN in writing at least 180 days prior to an expiration date that
it does not desire to renew the Agreement for an additional term; and provided
further, however, that such notice shall not be given and if given shall have
no effect (i) within three years after a Change in Control or (ii) during any
period of time when CARBONIC has reason to believe that any third person has
begun a tender or exchange offer, circulated a proxy to stockholders, or taken
other steps or formulated plans to effect a Change in Control, such period of
time to end when, in the opinion of the Board of Directors, the third person
has abandoned or terminated his efforts or plans to effect a Change in Control.
7. EXPENSES. CARBONIC shall pay or reimburse COLLEN for all costs and
expenses, including, without limitation, court costs and attorneys' fees,
incurred by COLLEN as a result of any claim, action or proceeding by COLLEN
against CARBONIC arising out of, or challenging the validity or enforceability
of, this Agreement or any provision of this agreement.
8. MISCELLANEOUS.
(a) ASSIGNMENT. No right, benefit or interest under this agreement
shall be subject to assignment, anticipation, alienation, sale encumbrance,
charge, pledge, hypothecation or set-off in respect of any claim, debt or
obligation, or to execution, attachment, levy or similar process; provided,
however, that COLLEN may assign any right, benefit or interest under this
agreement if such assignment is permitted under the terms of any plan or policy
of insurance or annuity contract governing such right, benefit or interest.
(b) CONSTRUCTION OF AGREEMENT. Nothing in this Agreement shall be
construed to amend any provision of any plan or policy of CARBONIC other than
as specifically stated here. This Agreement is not, and nothing here shall be
deemed to create an employment contract between COLLEN and CARBONIC or any of
its subsidiaries. COLLEN acknowledges that the rights of CARBONIC and the
subsidiary employing him to change or reduce at any time and from time to time
his compensation, title, responsibilities, location and all other aspects of
the employment relationship or to discharge him proper to a Change in Control
shall remain wholly unaffected by the provisions of this Agreement. No waiver
by either party to this Agreement at any time of any breach by the other party
to this agreement, or noncompliance with any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of that
or of any provision or condition. This Agreement sets forth the entire
agreement of the parties on the subjects addressed herein and no agreements or
representations, express or implied on such subjects have been made by either
party which are not set forth expressly in this Agreement.
(c) AMENDMENT. This Agreement may not be amended, modified or canceled
except by written agreement of the parties.
(d) WAIVER. No provision of this Agreement may be waived except by a
writing signed by the party to be bound there.
(e) SEVERABILITY. In the event that any provisions or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason,
the remaining provisions of this Agreement shall remain in full force and
effect to the fullest extent permitted by law.
(f) SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of COLLEN and his personal representative and heirs, and CARBONIC and
any successor organization or organizations which shall succeed to
substantially all of the business and property of CARBONIC whether by means of
merger, consolidation, acquisition of substantially all of the assets of
CARBONIC or otherwise, including by operation of law. References here to
duties and obligations of CARBONIC following a Change in Control are binding
upon and shall be the joint and several liability of CARBONIC and/or any
successor of it and all subsidiaries of CARBONIC and/or any successors of any
of them.
(g) TAXES. Any payment or delivery required under this Agreement shall
be subject to all requirements of the law with regard to withholding of taxes,
filing, making of reports and the like, and CARBONIC shall use its best efforts
to satisfy promptly all such requirements.
(h) CORPORATE AUTHORITY. CARBONIC represents that this Agreement, and
the transactions contemplated herein and the execution and delivery hereof have
been duly authorized by all necessary corporate actions, including, without
limitation the action on the part of the Board of Directors, officers and
agents of CARBONIC. Furthermore, CARBONIC represents that the appropriate
corporate meetings were held authorizing the aforementioned obligations and
that copies of such corporate minutes and corporate resolutions authorizing
this transaction will be delivered to COLLEN upon request.
(i) NOTICES. All notices required to be given under this Agreement must
be in writing. Notices under this Agreement will be deemed duly served and
given when either (a) personally delivered to the party or the designated agent
of the party to whom such notices are directed; or (b) deposited in the U.S.
Mail, first class postage pre-paid, addressed to the party at the address
listed for the party in the introductory paragraph of this Agreement or such
other address as maybe designated by party in writing.
(j) CHOICE OF LAW. This Agreement has been executed and delivered in
the State of Texas and shall be interpreted under and construed in accordance
with the laws of the State of Texas. It is agreed that Texas Law will control
the validity of and the obligations of the parties covered by this Agreement.
(k) JURISDICTION AND VENUE. All actions or proceedings with respect to
or arising directly or indirectly in connection with, out of or from this
Agreement or any of the agreements contemplated herein made by any of the
parties hereto shall be litigated in courts having situs in Bexar County,
Texas, and each party hereto hereby submits to the jurisdiction of such courts
in any such action and hereby waives any rights that they may have to transfer
or change the jurisdiction or venue of any litigation brought against them in
accordance with this section.
(l) GOVERNING LAW. This Agreement sets forth the entire agreement and
understanding of the parties to this agreement with respect to the matters
covered herein.
(m) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original instrument in which
will have the same effect as the original instrument and all of which shall
constitute one in the same agreement.
IN WITNESS, the parties have executed this Agreement as of the day and
year first above written.
CARBONIC RESERVES
By: WILLIAM M. BEARD
William M. Beard
Chairman of the Board of Directors
of Carbonic Reserves
CLIFFORD H. COLLEN, JR.
Clifford H. Collen, Jr.
STATE OF OKLAHOMA )
) ss:
COUNTY OF OKLAHOMA )
Subscribed to, sworn to, and acknowledged before me by WILLIAM M. BEARD,
as CHAIRMAN OF THE BOARD OF DIRECTORS of CARBONIC RESERVES, by and on behalf of
and with the authority of the shareholders and the Board of Directors of said
corporation on this the 24th day of January, 1997, to certify which witness my
hand and seal of office.
REBECCA G. WITCHER
Rebecca G. Witcher
Notary Public, State of Oklahoma
Exp. 9/16/00
STATE OF TEXAS )
) ss:
COUNTY OF BEXAR )
Subscribed to, sworn to and acknowledged before me by CLIFFORD H. COLLEN,
JR., on this the 25th day of January, 1997, to certify which witness my hand
and seal of office.
SUSAN M. NEWLON
Notary Public, State of Texas
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