<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended
SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
Commission file number 1-547
__________________________
THE PHOENIX RESOURCE COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-1927105
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6525 North Meridian Avenue
Oklahoma City, Oklahoma 73116-1491
(Address of Principal Executive Offices) (Zip Code)
(405) 728-5100
(Registrant's Telephone Number, Including Area Code)
__________________________
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
At October 26, 1995 there were 15,596,196 shares of the registrant's
common stock outstanding.
<PAGE> 2
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
<S> <C>
Consolidated Statement of Income -
Three Months and Nine Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . 3
Consolidated Balance Sheet at September 30, 1995 and December 31, 1994 . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 6
Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 8
PART II
OTHER INFORMATION
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
2
<PAGE> 3
THE PHOENIX RESOURCE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1995 1994 1995 1994
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas revenues . . . . . . . . . . . . . $ 5,418 $ 5,925 $ 16,795 $ 16,185
Revenues dedicated to foreign tax liability . 2,514 2,977 8,333 7,966
-------- -------- -------- --------
Operating revenues . . . . . . . . . . . . . 7,932 8,902 25,128 24,151
Interest and other income . . . . . . . . . . 589 287 1,395 773
-------- -------- -------- --------
8,521 9,189 26,523 24,924
-------- -------- -------- --------
Costs and Expenses:
Production costs . . . . . . . . . . . . . . . 1,465 1,519 4,496 4,277
Depreciation, depletion and amortization . . . 2,133 422 3,865 1,184
General and administrative . . . . . . . . . . 719 531 1,950 1,832
-------- -------- -------- --------
4,317 2,472 10,311 7,293
-------- -------- -------- --------
Income before income taxes . . . . . . . . . . . 4,204 6,717 16,212 17,631
Provision for income taxes:
U.S. alternative minimum tax . . . . . . . . . 46 70 149 192
Foreign . . . . . . . . . . . . . . . . . . . 2,514 2,977 8,333 7,966
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . $ 1,644 $ 3,670 $ 7,730 $ 9,473
======== ======== ======== ========
Income Per Share:
Weighted average common and common
equivalent shares outstanding . . . . . . . 16,201 16,052 16,102 16,576
======== ======== ======== ========
Net income . . . . . . . . . . . . . . . . . $ 0.10 $ 0.23 $ 0.48 $ 0.57
======== ======== ======== ========
</TABLE>
Prior year has been restated to reflect the change to full cost accounting.
The accompanying notes are an integral part of this statement.
3
<PAGE> 4
THE PHOENIX RESOURCE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except per share data)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
Current Assets: (Unaudited)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 20,391 $ 26,536
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . 4,818 2,561
Receivable for payment of foreign taxes . . . . . . . . . . . . . 8,333 10,657
Other current assets . . . . . . . . . . . . . . . . . . . . . . . 1,616 491
--------- ---------
35,158 40,245
--------- ---------
Property and Equipment, at cost:
Oil and gas properties (using full cost accounting) . . . . . . . 30,233 18,624
Other property and equipment . . . . . . . . . . . . . . . . . . . 983 1,909
--------- ---------
31,216 20,533
Less: Accumulated depreciation, depletion and amortization . . . . . 16,743 13,800
--------- ---------
Net Property and Equipment . . . . . . . . . . . . . . . . . . . . 14,473 6,733
Deferred Receivable for payment of foreign taxes . . . . . . . . . . 9,623 9,211
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426 252
--------- ---------
$ 59,680 $ 56,441
========= =========
</TABLE>
LIABILITIES AND STOCKHOLDERS EQUITY
<TABLE>
<S> <C> <C>
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 676 $ 1,062
Accrued foreign taxes . . . . . . . . . . . . . . . . . . . . . . 8,333 10,657
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . 696 857
--------- ---------
9,705 12,576
--------- ---------
Long-Term Obligations:
Deferred foreign taxes . . . . . . . . . . . . . . . . . . . . . . 9,623 9,211
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 916 1,096
--------- ---------
10,539 10,307
--------- ---------
Commitments and Contingencies (Note 4)
Stockholders Equity:
Preferred stock, par value $0.01 (authorized 5,000 shares,
none outstanding) . . . . . . . . . . . . . . . . . . . . . . . -- --
Common stock, par value $0.01 (authorized 20,000 shares,
15,596 shares outstanding in 1995 and 15,708 in 1994) . . . . . 170 170
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 39,609 39,311
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 9,724 2,929
Treasury stock, at cost (1,366 shares in 1995 and 1,254 shares
in 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,067) (8,852)
--------- ---------
39,436 33,558
--------- ---------
$ 59,680 $ 56,441
========= =========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
4
<PAGE> 5
THE PHOENIX RESOURCE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from purchasers . . . . . . . . . . . . . . . . . . $ 14,802 $ 15,697
Cash paid to suppliers and employees . . . . . . . . . . . . . . . (6,746) (6,843)
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . (468) (411)
Interest and other cash receipts . . . . . . . . . . . . . . . . . 1,144 564
-------- --------
Net cash provided by operating activities . . . . . . . . . . . 8,732 9,007
-------- --------
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . (12,625) (1,953)
-------- --------
Net cash used in investing activities . . . . . . . . . . . . . (12,625) (1,953)
-------- --------
Cash flows from financing activities:
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . (1,421) (8,071)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . (935) (613)
Proceeds from stock options exercised . . . . . . . . . . . . . . 164 18
Debt issue costs . . . . . . . . . . . . . . . . . . . . . . . . . (60) --
-------- --------
Net cash used in financing activities . . . . . . . . . . . . . (2,252) (8,666)
-------- --------
Net increase (decrease) in cash and cash equivalents . . . . . . . . (6,145) (1,612)
Cash and cash equivalents, beginning of period . . . . . . . . . . . 26,536 25,248
-------- --------
Cash and cash equivalents, end of period . . . . . . . . . . . . $ 20,391 $ 23,636
======== ========
Reconciliation of net income to net cash provided
by operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,730 $ 9,473
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization . . . . . . . . . . . . 3,865 1,184
Capitalized general and administrative . . . . . . . . . . . . . (638) (400)
Increase in accounts receivable related to operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . . (2,257) (742)
Decrease in accounts payable related to operating activities . . (47) (127)
Increase (decrease) in accrued liabilities related to
operating activities . . . . . . . . . . . . . . . . . . . . . (161) 97
Other noncash items . . . . . . . . . . . . . . . . . . . . . . 240 (478)
-------- --------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . 1,002 (466)
-------- --------
Net cash provided by operating activities . . . . . . . . . $ 8,732 $ 9,007
======== ========
</TABLE>
Prior year has been restated to reflect the change to full cost accounting.
The accompanying notes are an integral part of this statement.
5
<PAGE> 6
THE PHOENIX RESOURCE COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES:
All references herein to the "Company" mean The Phoenix Resource
Companies, Inc. and/or one or more of its wholly-owned subsidiaries. The
accompanying unaudited consolidated financial statements and notes thereto have
been prepared in accordance with accounting policies set forth in the Company's
1994 Annual Report on Form 10-K and should be read in conjunction with the
Notes to Consolidated Financial Statements therein. The financial statements
reflect all adjustments, consisting of normal recurring accruals, which the
Company considers necessary for a fair presentation of the financial position
and the results of operations for such periods.
NOTE 2 - CHANGE IN ACCOUNTING PRINCIPLE:
During the fourth quarter of 1994 the Company changed its method of
accounting for oil and gas operations from the successful efforts method to the
full cost method. The 1994 financial statements presented herein have been
restated to reflect the change.
NOTE 3 - STOCKHOLDERS' EQUITY:
Capital Stock - A two-for-one split of the number of shares of Common
Stock outstanding was effected in January 1995. A second two-for-one split was
effected in September 1995. All references in the accompanying financial
statements to the number of common shares and per share amounts have been
restated to reflect both splits.
During the first nine months of 1995 the Company purchased 140,000
shares of its Common Stock in open market transactions at an average price of
$10.15 per share. During the first nine months of 1995, 28,000 shares were
issued from Treasury Stock upon exercise of stock options. Changes in
stockholders' equity during the nine months ended September 30, 1995 are shown
in the following table (in thousands):
<TABLE>
<CAPTION>
Common Stock Treasury Stock
----------------- Paid-in ---------------- Retained
Shares Amount Capital Shares Amount Earnings
------- ------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1994 . . . 15,708 $ 170 $ 39,311 1,254 $ (8,852) $ 2,929
Treasury stock purchased . (140) -- -- 140 (1,421) --
Stock options exercised . . 28 -- (43) (28) 206 --
Accrual pursuant to Director
Plan (Note 4) . . . . . . -- -- 341 -- -- --
Dividends . . . . . . . . . -- -- -- -- -- (935)
Net income . . . . . . . . -- -- -- -- -- 7,730
------ ------ -------- ----- -------- -------
Balance September 30, 1995 . . 15,596 $ 170 $ 39,609 1,366 $(10,067) $ 9,724
====== ====== ======== ===== ======== =======
</TABLE>
NOTE 4 - COMMITMENTS AND CONTINGENCIES:
The Company conducts almost all of its business in Egypt. The
business environment in foreign countries varies greatly. Relevant factors
include the laws of a country, its political stability, the political stability
of its region of the world, its attitude toward foreign investments,
availability and skill of its work force and the technological sophistication
of its business community. Adverse developments in the business environment in
Egypt would likely
6
<PAGE> 7
have a material adverse effect on the Company. The Company does not insure
against political risks.
Egypt retains the right of requisition of production from Egyptian
concessions and cancellation of the concession agreements upon the occurrence
of specific events, including a national emergency due to war, imminent
expectation of war or internal causes, unauthorized assignment of interests in
the concession, the concession holder being adjudicated bankrupt by a court of
competent jurisdiction and intentional extraction of any mineral not authorized
by the concession agreement. Requisition or cancellation of the Company's
concession agreements as a result of the foregoing or for any other reasons
would have a material adverse effect on the Company.
The Company is committed, under certain circumstances, to pay
approximately $1.7 million pursuant to various employment contracts with
certain key employees. Additionally, the Company is committed, under certain
circumstances, to pay certain key employees approximately $1.1 million as of
September 30, 1995 pursuant to bonus plans, of which $0.8 million has been
accrued.
During the third quarter of 1995 the Board of Directors adopted a
Nonemployee Director Compensation Plan (the Director Plan ). The Director
Plan, which is subject to shareholder approval, provides for the grant of
1,500 shares of Common Stock to each nonemployee director for each year that
individual serves as a director since May 11, 1993. The Common Stock granted
is vested ratably over each year of service and would be issuable to a
director upon termination as a director, except in the event of removal for
cause. Based upon the closing stock price on the date of adoption, a total of
$341,000 was recorded in both Paid-in Capital and General and Administrative
Expense in the accompanying 1995 financial statements.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following discussion and analysis of the three months and nine
months ended September 30, 1995 compared to the same periods of 1994 should be
read in conjunction with the Consolidated Financial Statements and Notes
thereto. The three months and nine months ended September 30, 1994 have been
restated to reflect the change to full cost accounting.
Third Quarter 1995 Compared to Third Quarter 1994.
Net income for the third quarter of 1995 was $1.6 million compared to
$3.7 million for the same period of 1994. Net income decreased primarily due
to an increase in the noncash charge for depreciation, depletion and
amortization ( DD&A expense ). DD&A expense increased $1.7 million in the third
quarter of 1995 as compared to the third quarter of 1994. This increase in the
noncash DD&A expense is primarily due to the inclusion of costs attributable to
proved reserves added from the Qarun Concession. During the 1994 period
substantially all of the Company's proved reserves were in the Khalda
Concession, whereas in 1995 the Company's proved reserves are in both the Qarun
and Khalda Concessions. Costs in both concessions are cost recoverable. The
computation of DD&A is based on a single country-wide pool of all past and
future costs attributable to all proved reserves in a particular country and,
therefore, because all of the Company's proved reserves are in Egypt, the
Company's DD&A is based on a pooling of all costs. The Company's share of the
past and future costs associated with the Qarun proved reserves, where the
Company pays its full 50% share of the costs, are substantially higher on a per
barrel basis than the Company's share of costs in the Khalda Concession,
because a large portion of the Company's 40% share of the Khalda costs are paid
by one of the Company's partners. Moreover, the costs recognized on the Qarun
Concession for DD&A purposes include future costs for central processing,
pipeline and storage facilities, which facilities may be utilized to handle
production volumes from subsequent additions to proved reserves. Accordingly,
costs attributable to future reserves in Qarun, if and when added, could be
less per barrel than that applicable to reserves presently considered proved on
the Qarun Concession.
The average price for Khalda Concession oil for the third quarter of
1995 was $15.86 per barrel compared to $16.24 per barrel received in the third
quarter of 1994. Average daily gross oil production from the Khalda Concession
was 31,260 barrels per day for the third quarter of 1995 compared to 34,008
barrels per day in the same period of 1994.
First Nine Months of 1995 Compared to 1994.
Net income for the first nine months of 1995 was $7.7 million compared
to $9.5 million for the same period of 1994. Net income decreased primarily
due to an increase in the noncash charge for DD&A expense partially offset by
increased operating revenue and interest income. DD&A expense for the first
nine months of 1995 increased $2.7 million compared to the same period of 1994.
This increase is primarily due to the inclusion of costs attributable to proved
reserves added from the Qarun Concession, as more fully discussed above.
The average price for Khalda Concession oil for the first nine months
of 1995 was $16.82 per barrel compared to $15.47 per barrel for the same period
of 1994. Average daily gross oil production from the Khalda Concession was
31,015 barrels per day for the nine months ended September 30, 1995 compared to
32,733 barrels per day for the same period of 1994.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1995 the Company's working capital (current assets
less current liabilities) was $25.5 million, which included cash and cash
equivalents of $20.4 million. Net cash provided by operating activities for
the nine months ended September 30, 1995 was $8.7 million. Cash utilized for
financing activities for the nine months ended September 30, 1995 was $2.3
million, which was used to repurchase the Company's Common Stock and pay
dividends on the Company's Common Stock. The Company currently has no
long-term debt. Cash utilized in investing activities was $12.6 million, which
was primarily used for capital expenditures in the Qarun and Khalda
Concessions.
Currently, the Company's short-term and long-term sources of liquidity
are working capital and cash flow from operations. These sources of liquidity
would be available to fund a portion of the development of any of the Company's
exploratory successes, including recent discoveries in the Qarun Concession and
any successes on the newly acquired South Khalda block; to participate in the
development of natural gas reserves in the Khalda Concession; and to pursue
other oil and gas opportunities that may be identified by the Company. The
Company has engaged the International Finance Corporation, an affiliate of the
World Bank, to assist it in arranging a $50 million financing for its share of
capital expenditures related to the initial development of the Qarun
Concession, including construction of facilities and pipeline. The Company
believes that additional external sources of capital, if needed, coupled with
working capital and cash flow from operations, will provide sufficient sources
of short-term and long-term liquidity.
9
<PAGE> 10
PART II
OTHER INFORMATION
Exhibits
99 Nonemployee Director Compensation Plan of The Phoenix Resource Companies,
Inc.
27 Financial Data Schedule
SIGNATURE
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.
THE PHOENIX RESOURCE COMPANIES, INC.
------------------------------------
(Registrant)
/s/George D. Lawrence Jr.
------------------------------------
George D. Lawrence Jr.
President & Chief Executive Officer
(Principal Executive Officer)
DATE: November 1, 1995
10
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
Exhibits
- --------
<S> <C>
99 Nonemployee Director Compensation Plan of The Phoenix Resource
Companies, Inc. . . . . . . . . . . . . . . .
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 20,391
<SECURITIES> 0
<RECEIVABLES> 4,818
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 35,158
<PP&E> 31,216
<DEPRECIATION> 16,743
<TOTAL-ASSETS> 59,680
<CURRENT-LIABILITIES> 9,705
<BONDS> 0
<COMMON> 170
0
0
<OTHER-SE> 39,266
<TOTAL-LIABILITY-AND-EQUITY> 59,680
<SALES> 25,128
<TOTAL-REVENUES> 26,523
<CGS> 0
<TOTAL-COSTS> 10,311
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,212
<INCOME-TAX> 8,482
<INCOME-CONTINUING> 7,730
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,730
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
<PAGE> 1
NONEMPLOYEE DIRECTOR COMPENSATION PLAN
OF
THE PHOENIX RESOURCE COMPANIES, INC.
1. PURPOSES OF THIS PLAN.
The purposes of the Nonemployee Director Compensation Plan (the
"Plan") of The Phoenix Resource Companies, Inc., a Delaware corporation (the
"Company"), are to provide an incentive for directors of the Company, who are
not employees of the Company ("Eligible Directors"), to remain in the service
of the Company, to extend to them the opportunity to acquire a proprietary
interest in the Company so that they will apply their best efforts in the
development and financial success of the Company, and to aid the Company in
attracting able persons to enter the service of the Company.
2. ADMINISTRATION OF THIS PLAN.
This Plan shall be administered by a Committee (herein so called) of
the Board of Directors of the Company, consisting of all of the directors of
the Company, except that any director who is eligible to participate in the
Employee Stock Option Plan of the Company shall not be a member of the
Committee nor participate in the administration of this Plan.
The Chairman of the Committee shall be the Chairman of the Board of
the Company, if the Chairman of the Board of the Company is an Eligible
Director. If the Chairman of the Board of the Company is not an Eligible
Director, then the Committee may elect one of its members as its Chairman. The
Committee shall hold its meetings at such times and places as it may determine.
All decisions and determinations of the Committee shall be made by the majority
vote or decision of all of its members present at a meeting; provided, however,
that any decision or determination reduced to writing and signed by all of the
members of the Committee shall be as fully effective as if it had been made at
a meeting duly called and held. The Committee may make any rules and
regulations for the conduct of its business that are not inconsistent with the
provisions hereof and with the bylaws of the Company as it may deem advisable.
Subject to the express provisions hereof, the Committee shall have the
authority, in its sole and absolute discretion, (a) to adopt, amend, and
rescind administrative and interpretive rules and regulations relating to this
Plan; (b) to construe the terms and provisions of this Plan and any agreements
entered into between the Company and any Eligible Director relating to this
Plan; and (c) to make all other determinations and perform all other acts
necessary or advisable for administering this Plan, including the delegation of
such ministerial acts and responsibilities as the Committee deems
<PAGE> 2
appropriate. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in this Plan or in any agreement entered into
between the Company and any Eligible Director relating to this Plan in the
manner and to the extent it shall deem expedient to carry it into effect, and
it shall be the sole and final judge of such expediency. The Committee shall
have full discretion to make all determinations on the matters referred to in
this Section; such determinations shall be final, binding and conclusive.
3. QUARTERLY PAYMENTS.
Each Eligible Director will receive a cash quarterly payment of
$5,000, payable on the last day of each calendar quarter (pro rated for partial
periods in which such person was an Eligible Director). The Chairman of the
Board of Directors of the Company will receive an additional quarterly payment
of $5,000, payable on the last day of each calendar quarter (pro rated for
partial periods in which such person was Chairman of the Board of Directors of
the Company).
4. MEETING FEES.
Each Eligible Director will receive a fee of $1,000 for each meeting
of the Board of Directors or any committee of the Board of Directors that such
Eligible Director either personally attends or attends by conference telephone.
Such meeting fee will be payable at the meeting or, in the case of attendance
by conference telephone, promptly after the meeting. In addition, each
Eligible Director shall be reimbursed for all reasonable expenses incurred by
the Eligible Director in traveling to and from such meeting. Payment of such
expenses shall occur promptly after the Eligible Director submits an expense
report to the Company in accordance with the Company's expense reimbursement
policies. Because of the extensive time and travel required by any Eligible
Director that resides outside North America, each such Eligible Director who
personally attends a meeting in North America shall also receive a
supplementary meeting fee of an additional $1,000, payable at such meeting.
5. STOCK GRANT.
Each Eligible Director shall be entitled to receive, within 20 days
after the occurrence of a Qualifying Event (as hereinafter defined) affecting
such Eligible Director, a stock certificate representing the number of shares
of common stock, $.01 par value, of the Company ("Common Stock") calculated in
accordance with the terms of this Plan. Upon the occurrence of a Qualifying
Event affecting an Eligible Director, the Company shall deliver to such
Eligible Director a stock certificate representing a number of shares of Common
Stock (rounded to the nearest whole share) equal to 1,500 times each year (pro
rated for partial years) that such individual was an Eligible Director during
the period from May 11, 1993 to the earlier of (a) the date of such Qualifying
Event or (b) the date that the Plan is terminated. Notwithstanding the
foregoing, in the event of a Change of Control (as hereinafter defined) such
period
2
<PAGE> 3
shall be extended to the date that the Eligible Director's then current full
term as a director would have expired. Shares of Common Stock granted
hereunder may be unissued or reacquired shares of Common Stock, as the Company
may, in its sole and absolute discretion, from time to time determine.
Until such certificate is issued by the Company, the Eligible Director
shall not have any rights as a stockholder of the Company with respect to such
shares, including the right to vote such shares or the right to receive any
dividends with respect thereto. In the event of the death of such Eligible
Director, the stock certificate shall be issued to the Eligible Director's
designated beneficiary. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash or other property) or distributions or other
rights for which the record date is prior to the date such certificate is
issued, except as specifically provided in Section 9. Shares of Common Stock
granted pursuant to this Plan shall be held by the Eligible Director for a
period of six months from the date of grant.
For purposes of this Plan, the term "Qualifying Event" shall mean with
respect to any Eligible Director, (a) the date that the Eligible Director is no
longer a director of the Company for any reason, other than the removal of such
Eligible Director by the stockholders of the Company for cause, (b) the date
that such Eligible Director becomes an employee of the Company or any of its
subsidiaries, (c) the date of such Eligible Director's death or Disability (as
hereinafter defined), or (d) the date that a Change of Control (as hereinafter
defined) occurs. Notwithstanding anything in this Plan to the contrary, an
Eligible Director shall not be entitled to receive any shares of Common Stock
or alternative cash payment pursuant to the terms of this Plan in the event
that such Eligible Director is removed as a director of the Company for cause.
For purposes of this Plan, the term "Disability" shall mean the
inability of the Eligible Director for a period of six months, or the expected
inability of the Eligible Director for a period of six months, substantially to
perform his duties as a member of the Board of Directors of the Company.
For purposes of this Plan, a "Change of Control" shall occur when:
(a) any "person" including a "group" as determined in accordance
with Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing at least 35% of the combined voting
power of the then outstanding securities of the Company;
(b) as a result of, or in connection with, any tender offer or
exchange offer, merger or other business combination, sale of assets or
contested election, or any combination of the foregoing transactions (a
"Transaction"), the persons who were Directors of the Company immediately
before the Transaction shall cease to constitute a majority of the Board of
Directors of the Company, or any successor to the Company;
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(c) the Company is merged or consolidated with another corporation
and as a result of such merger or consolidation a majority of the outstanding
voting securities of the surviving or resulting corporation shall no longer be
owned in the aggregate by the stockholders of the Company immediately preceding
such Transaction; or
(d) the Company transfers substantially all of its assets to
another corporation that is not an affiliate of the Company.
6. CASH PAYMENT ALTERNATIVE.
Notwithstanding anything in this Plan to the contrary, the Company, at
its sole and exclusive option, may elect, in whole or in part, to pay an
Eligible Director who is otherwise entitled to receive a stock certificate
representing shares of Common Stock, the Fair Market Value (as hereinafter
defined) of the shares of Common Stock on the date of the applicable Qualifying
Event in lieu of issuing such shares.
For purposes of this Plan, the term "Fair Market Value" shall mean:
(a) If shares of Common Stock of the same class are listed or
admitted to unlisted trading privileges on any national or regional securities
exchange on the date of the applicable Qualifying Event, the last reported sale
price on such exchange on the last business day prior to the date in question;
or
(b) If shares of Common Stock of the same class shall not be
listed or admitted to unlisted trading privileges on any national or regional
securities exchange and sales prices therefor in the over-the-counter market
shall be reported on the NASDAQ National Market System on the date of the
applicable Qualifying Event, the last reported sale price so reported on the
last business day prior to the date in question; or
(c) If shares of Common Stock of the same class shall not be
listed or admitted to unlisted trading privileges on any national or regional
securities exchange or on the NASDAQ National Market System, and bid and asked
prices therefor in the over-the-counter market shall be reported by NASDAQ on
the date of the applicable Qualifying Event, the average of the closing bid and
asked prices on the last business day prior to the date in question; and
(d) If shares of Common Stock of the same class are not listed or
admitted to unlisted trading privileges as provided above and sales prices or
bid and asked prices therefor shall not be reported by NASDAQ as provided above
on the date of the applicable Qualifying Event, the value shall be determined
in good faith by the Board of Directors.
7. TAXES.
The Company may, in its discretion, require an Eligible Director to
pay to the Company prior to the delivery of the stock certificate representing
the shares of
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Common Stock the amount that the Company deems necessary to satisfy its
obligation to withhold federal, state or local income or other taxes incurred
in connection with the issuance of such stock certificate. In the event that
the Company elects to make a cash payment pursuant to the provisions of Section
6, the Company may, in its discretion, reduce the amount of such payment by the
amount that the Company deems necessary to satisfy its obligation to withhold
federal, state or local income or other taxes incurred in connection with such
payment.
8. COMPLIANCE WITH LAWS.
Nothing in this Plan shall require the Company to issue any shares of
Common Stock if such issuance would, in the opinion of counsel for the Company,
constitute a violation of the Securities Act of 1933, as amended, or any
similar or superseding statute or statutes, or any other applicable statute or
regulation, as then in effect. As a condition precedent to the issuance of
such shares, the Company may require from the Eligible Director (or in the
event of his death, his legal representatives, heirs, legatees, or
distributees) such written representations concerning his intentions with
regard to the retention or disposition of the shares of Common Stock to be
issued by the Company and such written covenants and agreements, if any, as to
the manner of disposal of such shares as, in the opinion of counsel to the
Company, may be necessary to ensure that any disposition by such Eligible
Director (or in the event of his death, his legal representatives, heirs,
legatees, or distributees), will not involve a violation of the Securities Act
of 1933, as amended, or any similar or superseding statute or statutes, or any
other applicable state or federal statute or regulation, as then in effect.
Certificates for shares of Common Stock, when issued, may have the following or
similar legend, or statements of other applicable restrictions, endorsed
thereon, and may not be immediately transferable:
"The shares of Common Stock evidenced by this certificate have been
issued to the registered owner in reliance upon written representations that
these shares have been purchased for investment. These shares have not been
registered under the Securities Act of 1933, as amended, or any applicable
state securities laws, in reliance upon an exception from registration.
Without such registration, these shares may not be sold, transferred, assigned
or otherwise disposed of unless, in the opinion of the Company and its legal
counsel, such sale, transfer, assignment or disposition will not be in
violation of the Securities Act of 1933, as amended, applicable rules and
regulations of the Securities and Exchange Commission, and any applicable state
securities laws."
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
The existence of this Plan shall not affect in any way the right or
power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds,
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debentures, preferred or prior preference stocks ahead of or affecting the
Common Stock or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.
The shares of Common Stock issuable pursuant to this Plan are shares
of Common Stock of the Company as presently constituted. If, and whenever,
prior to the delivery by the Company of the shares of Common Stock to an
Eligible Director, the Company shall effect a subdivision or combination of
shares or other capital readjustment, the payment of a stock dividend, a stock
split, combination of shares or recapitalization or other increase or
reduction in the number of shares of Common Stock outstanding without receiving
compensation therefor in money, services, or property, the number and class of
shares issuable pursuant to this Plan shall be automatically adjusted to
accurately and equitably reflect the effect thereon of such change (provided,
however, that any fractional share resulting from such adjustment may be
eliminated).
Except as expressly provided herein, the issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services, either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustments by reason thereof
shall be made with respect to, the number of shares of Common Stock issuable
hereunder.
In the event of a dispute concerning such adjustment, the Committee
shall have full discretion to determine the resolution of the dispute. Such
determination shall be final, binding and conclusive.
10. DURATION OF PLAN.
This Plan is effective as of September 29, 1995, subject to the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present, or represented, and entitled to vote at a meeting duly
held in accordance with the laws of the State of Delaware, and shall terminate
on such date as may be determined by the affirmative vote of the Board of
Directors of the Company. Upon termination of this Plan, an Eligible Director
shall remain entitled to receive, upon the occurrence of a Qualifying Event,
the number shares of Common Stock calculated in accordance with the provisions
of Section 5.
11. AMENDMENT OF PLAN.
The Board of Directors may at any time terminate or from time to time
amend or suspend this Plan;provided, however, that no such amendment shall,
without approval of the stockholders of the Company, except as provided in
Section 9, (a)
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materially increase the benefits accruing to participants under this Plan; (b)
materially increase the number of shares of Common Stock or other securities
that may be issued under this Plan; or (c) materially modify the requirements
as to eligibility for participation in this Plan. No amendment, suspension or
termination shall, without an Eligible Director's consent, alter or impair any
of the rights or obligations under this Plan accrued as of the date of such
amendment, suspension or termination. In addition, the provisions of Sections
5 and 6 may not be amended more than once every six months, other than to
comport with changes in the Internal Revenue Code, the Employee Retirement
Income Security Act or the rules promulgated thereunder.
12. GENERAL.
12.1 Right of the Company and Affiliates to Terminate Employment.
Nothing contained in this Plan shall confer upon any Eligible Director the
right to continue as a director of the Company or the right to be nominated for
election as a director of the Company, or interfere in any way with the rights
of the Company or its stockholders to remove the Eligible Director as a
director of the Company.
12.2 No Liability for Good Faith Determinations. Neither the
members of the Board of Directors nor any member of the Committee shall be
liable for any act, omission, or determination taken or made in good faith with
respect to this Plan, and members of the Board of Directors and the Committee
shall be entitled to indemnification and reimbursement by the Company in
respect of any claim, loss, damage, or expense (including attorneys' fees, the
costs of settling any suit, provided such settlement is approved by independent
legal counsel selected by the Company, and amounts paid in satisfaction of a
judgment, except a judgment based on a finding of bad faith) arising therefrom
to the full extent permitted by law and under any directors and officers
liability or similar insurance coverage that may from time to time be in
effect.
12.3 Execution of Receipts and Releases. Any payment of cash or
any issuance or transfer of shares of Common Stock to an Eligible Director, or
to his legal representative, heir, legatee, or distributee, in accordance with
the provisions hereof, shall, to the extent thereof, be in full satisfaction of
all claims of such persons hereunder. The Committee may require any Eligible
Director, legal representative, heir, legatee, or distributee, as a condition
precedent to such payment, to execute a release and receipt therefor in such
form as it shall determine.
12.4 No Guarantee of Interests. Neither the Committee nor the
Company guarantees the Common Stock of the Company from loss or depreciation.
12.5 Payment of Expenses. All expenses incident to the
administration, termination, or protection of this Plan, including, but not
limited to, legal and accounting fees, shall be paid by the Company; provided,
however, the Company may recover any and all damages, fees, expenses, and/or
costs arising out of any actions
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taken by the Company to enforce its rights hereunder.
12.6 Severability. If any provision of this Plan is held to be
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions hereof, but such provision shall be fully
severable and this Plan shall be construed and enforced as if the illegal or
invalid provision had never been included herein.
12.7 Notices. Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered or sent by
mail or by a nationally recognized courier service. Any notice required or
permitted to be delivered hereunder shall be deemed to be delivered on the date
on which it is personally delivered, or, if mailed, whether actually received
or not, on the third business day after it is deposited in the United States
mail, certified or registered, postage prepaid, addressed to the person who is
to receive it at the address which such person has previously specified by
written notice delivered in accordance herewith or, if by courier, 24 hours
after it is sent, by priority service, addressed as described in this Section.
The Company or an Eligible Director may change, at any time and from time to
time, by written notice to the other, the address which it or he had previously
specified for receiving notices.
12.8 Assignment and Successors. The rights of an Eligible Director
or any other person to the issuance of Common Stock or cash in lieu thereof
shall not be assigned, transferred, pledged or encumbered, except by will, by
the laws of descent and distribution or by designation of a beneficiary to
apply in the event of death of an Eligible Director. This Plan shall be
binding upon each Eligible Director, his legal representatives, heirs, legatees
and distributees upon the Company, its successors, and assigns, and upon the
Committee, and its successors.
12.9 Headings. The titles and headings of sections and paragraphs
are included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
12.10 Governing Law. All questions arising with respect to the
provisions of this Plan shall be determined by application of the laws of the
State of Oklahoma, except to the extent Oklahoma law is preempted by federal
law.
12.11 Word Usage. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of this Plan dictates, the
plural shall be read as the singular and the singular as the plural.
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IN WITNESS WHEREOF, The Phoenix Resource Companies, Inc., acting by
and through its officer hereunto duly authorized, has executed this Plan as of
the 29th day of September, 1995.
THE PHOENIX RESOURCE COMPANIES, INC.
By: /s/ Joseph A. Pardo
---------------------------------
Joseph A. Pardo
Chairman of the Board
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