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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
THE EXPLORATION COMPANY OF DELAWARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
NOT APPLICABLE
- --------------------------------------------------------------------------------
1) Title of each class of securities to which transaction applies:
COMMON STOCK
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
17,471,849
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
NOT APPLICABLE
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
NOT APPLICABLE
- --------------------------------------------------------------------------------
5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid: NOT APPLICABLE
2) Form, Schedule or Registration Statement No.: NOT APPLICABLE
3) Filing Party: NOT APPLICABLE
4) Date Filed: NOT APPLICABLE
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THE EXPLORATION COMPANY OF DELAWARE, INC.
500 North Loop 1604 East, Suite 250
San Antonio, Texas 78232
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on May 25, 2001
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of The Exploration Company of
Delaware, Inc. (the "Company"), will be held at The Petroleum Club of San
Antonio, 8620 North New Braunfels Avenue, San Antonio, Texas on Friday, May 25,
2001, at 10:00 a.m., San Antonio time, for the following purposes:
1. To elect six nominees to the Board of Directors, to serve until their
successors are duly elected and qualified;
2. To consider a proposal to amend the Company's Certificate of Incorporation
that would establish a classified board of directors. The proposed
classified board provisions would divide the Board into three classes of
directors, with the number of directors in each class to be as nearly equal
as possible, and with each class to be elected for a three-year term on a
staggered basis. The affirmative vote of a majority of the outstanding
shares of the common stock is required for adoption of the amendment. The
classified board provisions are intended to promote management continuity
and stability and to afford time and flexibility in responding to
unsolicited tender offers.
3. To consider a proposal to amend the Company's Certificate of Incorporation
that would eliminate the right of stockholders of the Company to act by
written consent. The affirmative vote of a majority of the outstanding
shares of the common stock is required for adoption of the amendment. The
proposed amendment is intended to ensure that all stockholders of the
Company have notice of and a chance to participate in corporate actions
that, under the Delaware General Corporation Law, require stockholder
approval.
4. To consider a proposal to amend the Company's 1995 Flexible Incentive Plan
to increase by 200,000 the maximum number of shares of Common Stock that
may be issued with respect to awards under the Plan.
5. To ratify the appointment of Akin, Doherty, Klein & Feuge, P.C., certified
public accountants, as independent auditors of the Company and its
subsidiaries for the calendar year ending December 31, 2001; and
6. To transact any other business as properly may come before the meeting or
any adjournment thereof.
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Only shareholders of record at the close of business on April 10, 2001
(the Record Date) are entitled to notice of and to vote at the meeting or any
adjournment thereof. We hope you will be represented at the meeting whether or
not you expect to be present in person. We are excited about this year's
initiatives in making it easier for you to communicate your vote. This year you
again have three options in submitting your vote prior to the meeting date:
1. Over the Internet, at the address shown on your proxy card. If you have
access to the Internet, we encourage you to vote in this manner.
2. By telephone through the Toll-Free number shown on your proxy card.
3. By signing and returning the enclosed proxy card in the accompanying
envelope as promptly as possible.
If you hold your shares in the name of a bank or broker, the
availability of telephone and Internet voting depends on their voting processes.
Please follow the directions on your proxy card carefully. Your vote is
important and the Board of Directors of the Company appreciates your cooperation
in promptly returning proxies.
With this mailing, we are also offering you the option to receive
future proxy materials via the Internet. You can sign up by following the simple
instructions contained on the proxy card in this mailing. Receiving future
Annual Reports and Proxy Statements through the Internet will be simpler for
you, will save your company production and mailing expenses and is friendlier to
the environment. We hope you will take advantage of this option.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ Roberto R. Thomae
Chief Financial Officer
Secretary and Treasurer
April 6, 2001 Vice President-Finance
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THE EXPLORATION COMPANY OF DELAWARE, INC.
500 North Loop 1604 East, Suite 250
San Antonio, Texas 78232
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2001
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited on behalf of the Board of Directors of
The Exploration Company of Delaware, Inc. (the "Company") for use at the Annual
Meeting of Shareholders (the "Meeting") on May 25, 2001, at 10:00 a.m., San
Antonio time to be held at The Petroleum Club of San Antonio, 8620 North New
Braunfels Avenue, San Antonio, Texas, and at any adjournment thereof.
The cost of soliciting proxies will be borne by the Company. In
addition, the Company will reimburse its transfer agent for charges and expenses
in connection with the distribution of proxy material to the beneficial owners.
Solicitations may further be made by officers, directors and regular employees
of the Company, without additional compensation, by use of mails, telephone, and
telegraph or by personal calls.
Any shareholder giving a proxy for the Meeting has the power to revoke
it at any time prior to its use at the meeting. You may do so by (a) signing
another proxy with a later date and returning it to us prior to the meeting, (b)
voting again by telephone or over the Internet prior to 2:00 p.m. on May 24,
2001 or (c) voting again at the meeting. The approximate date on which this
Proxy Statement and the accompanying form of the proxy are first sent or given
to security holders is April 15, 2001.
In addition to this Proxy Statement, the Company is pleased to enclose
a copy of its 2000 Annual Report for the year ended December 31, 2000.
PURPOSE OF MEETING
At the Meeting, action will be taken: (1) to elect six directors to
hold office until the next Annual Meeting of Shareholders or until their
successors have been duly elected and qualified; (2) to consider and vote upon a
proposal to amend the Company's Certificate of Incorporation that would
establish a classified board of directors. The proposed classified board
provisions would divide the Board into three classes of directors, with the
number of directors in each class to be as nearly equal as possible, and with
each class to be elected for a three-year term on a staggered basis; (3) to
consider and vote upon a proposal to amend the Company's Certificate of
Incorporation that would eliminate the right of stockholders of the Company to
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act by written consent. The proposed amendment would ensure that all
stockholders of the Company have notice of and a chance to participate in
corporate actions that, under the Delaware General Corporation Law, require
stockholder approval; (4) to consider and vote upon a proposal to amend the
Company's 1995 Flexible Incentive Plan to increase by 200,000 to 1,700,000 the
maximum number of shares of Common Stock that may be issued with respect to
awards under the Plan; (5) to ratify the appointment of Akin, Doherty, Klein &
Feuge, P.C. certified public accountants, as independent auditors of the Company
and its subsidiaries for the calendar year ending December 31, 2001; and (6) to
transact any other business that may properly come before the Meeting. The Board
of Directors does not know of any other matter that is to come before the
Meeting. If any other matters are properly presented for consideration, however,
the persons authorized by the enclosed proxy will have discretion to vote on
such matters in accordance with their best judgment.
OUTSTANDING SHARES, QUORUM AND VOTING RIGHTS
Only holders of record of Common Stock of the Company at the close of
business on April 10, 2001 shall be entitled to notice of and to vote at the
Meeting. As of the close of business on April 10, 2001, there were 17,471,849
shares of Common Stock outstanding and entitled to be voted. Each share
outstanding entitles the holder thereof to one vote for each available position
as director.
One-half of the outstanding shares of Common Stock represented in
person or by proxy will constitute a quorum at the Meeting. However, if a quorum
is not represented at the Meeting, the shareholders entitled to vote at the
meeting, present in person or represented by proxy, have the power to adjourn
the Meeting from time to time, without notice other than by announcement at the
Meeting, until a quorum is present or represented. At any such adjourned meeting
at which a quorum is present or represented, any business may be transacted that
might have been transacted at the Meeting.
Each share of Common Stock may be voted to elect up to six individuals
(the number of directors to be elected) as directors of the Company. To be
elected, each nominee must receive a plurality of all votes cast with respect to
such position as director. It is intended that unless authorization to vote for
one or more nominees for director is withheld, proxies will be voted for the
election of all of the nominees named in this Proxy Statement.
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Votes cast by proxy or in person will be counted by one or more persons
appointed by the Company to act as inspectors (the "Election Inspectors") for
the Meeting. The Election Inspectors will treat shares represented by proxies
that reflect abstentions as shares that are present and entitled to vote for the
purpose of determining the presence of a quorum and for determining the outcome
of any matter submitted to the shareholders for a vote. Under Delaware law, in
an election of directors, the candidate for each director's position having the
highest number of votes cast in favor of his or her election is elected as
director. As to the ratification of the Company's auditors, Delaware law
provides that an action of shareholders is approved if it receives the
affirmative vote of the majority of shares present in person or represented by
proxy at the Meeting and entitled to vote on the subject matter. Thus abstention
and broker non-votes generally would have no effect on any vote.
Broker non-votes occur when a broker holding stock in street name votes
the shares on some matters but not others. Brokers are permitted to vote on
routine, non-controversial proposals in instances where they have not received
voting instruction from the beneficial owner of the stock but are not permitted
to vote on non-routine matters. The missing votes on non-routine matters are
deemed to be "broker non-votes." The Election Inspectors will treat broker
non-votes as shares that are present and entitled to vote for the purpose of
determining the presence of a quorum. However, for the purpose of determining
the outcome of any matter as to which the broker or nominee has indicated on the
Proxy that it does not have discretionary authority to vote, those shares will
be treated as not present and not entitled to vote with respect to that matter
(even though their shares are considered entitled to vote for quorum purposes
and may be entitled to vote on other matters).
PROPOSAL I - ELECTION OF DIRECTORS
Effective in May 2000, the Board of Directors expanded the number of
seats on the Board of Directors to six members. Six directors, constituting the
entire Board, are to be elected at the Meeting. Each director is to hold office
until the next Annual Meeting or until a successor is elected and qualified.
Each of the nominees has consented to serve as a director if elected. The
proxies named in the accompanying proxy have been designated by the Board of
Directors and they intend to vote for the following nominees for election as
directors, unless otherwise instructed in such proxy. The Board of Directors has
no reason to believe that any nominee will be unable to serve if elected. In the
event any nominee shall become unavailable for election, the proxies named in
the accompanying proxy intend to vote for the election of a substitute nominee
of their selection. The following table sets forth for each nominee for election
as a director of the Company, his age, principal occupation, position with the
Company and certain other information:
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DIRECTOR
AGE NAME AND PRINCIPAL OCCUPATION SINCE
--- ----------------------------- -----
71 Mr. Stephen M. Gose, Jr. 1984
------------------------
Mr. Gose has served as Chairman of the Board of Directors of the
Company since July 1984. He also serves as a member of the Audit and
Compensation Committees of the Board. He served as a Director of the
Company's former subsidiary, ExproFuels, Inc. from 1994 through 1999.
A geologist by training, Mr. Gose has been active for more than 45
years in exploration and development of oil and gas properties, in
real estate development and ranching through the operations of Retamco
Operating, Inc., a large shareholder of the Company. Mr. Gose has
served as a Director of Retamco Operating, Inc., its predecessors and
affiliates since 1987 and as its President and Chairman of its Board
of Directors since 1998.
57 Mr. Michael J. Pint 1997
-------------------
Mr. Pint has served as an outside Director since May, 1997 and as a
member of the Audit and Compensation Committees of the Board of
Directors since June 1997 and as Chairman of both Committees since
April 1998. Mr. Pint has 35 years banking experience, serving in the
bank regulatory arena as well as in the capacity of chairman,
president and director of 38 different banks and bank holding
companies throughout the country. Since 1995, Mr. Pint has served as a
Director of Valley Bancorp, Inc. and Valley Bank of Arizona, Inc. of
Phoenix, Arizona and Midway National Bank of St. Paul, Minnesota.
Previous bank regulatory and management positions include a four-year
term as Commissioner of Banks of Minnesota and Chairman of the
Minnesota Commerce Commission from 1979 to 1983 and Senior
Vice-President and Chief Financial Officer of the Federal Reserve Bank
of Minneapolis, Minnesota through 1983.
71 Mr. Robert L. Foree, Jr. 1997
------------------------
Mr. Foree has served as an outside Director since May 1997 and as a
member of the Audit and Compensation Committees of the Board of
Directors since June 1997. Since 1992, Mr. Foree has served as
President of Foree Oil Company, a privately held Dallas, Texas based
independent oil and gas exploration and production company. A
geologist by training, he has been active for more than 45 years in
the exploration and development of oil and gas properties.
55 Mr. Alan L. Edgar 2000
-----------------
Alan L. Edgar has served as an outside Director and as a member of the
Audit and Compensation Committees of the Board of Directors since May
2000. He has been involved in energy related investment banking and
equity analysis for over 28 years. Since 1998, Mr. Edgar has served as
President of Cochise Capital, Inc. a privately held Dallas, Texas
based company specializing in exploration and production related
mergers and acquisitions advisory and financing. Previous public
company mergers and acquisitions, investment banking and energy
financing positions include serving as Managing Director and Co-Head
of the Energy Group of Donaldson, Lufkin & Jenrette Securities, Inc.,
from 1990 to 1997, as Managing Director of the Energy Group of
Prudential-Bache Capital Funding from 1987 to 1990 and as Corporate
and Research Director of Schneider, Bernet & Hickman, Inc. (Thompson,
McKinnon) from 1972 through 1986.
8
52 Mr. James E. Sigmon 1984
-------------------
Mr. Sigmon has served as the Company's President since February 1985
and from July 1984 to October 1984. He has been a Director of the
Company since July 1984. Mr. Sigmon also served as a Director of the
Company's former subsidiary, ExproFuels, Inc. from 1994 through
November 1998. As an engineer, Mr. Sigmon has been active for 30 years
in the exploration and development of oil and gas properties. Prior to
joining the Company, he served in the management of a private oil and
gas exploration company active in drilling wells in South Texas.
45 Mr. Thomas H. Gose 1989
------------------
Mr. Gose has served as a Director of the Company since February 1989,
as Secretary from 1992 through March 1997 and as Assistant Secretary
since March 1997. Since October 2000 he has served as President of
NEOgas, Ltd. a Houston based subsidiary of NEOppg International Ltd.
NEOgas develops and markets technologies to transport and deliver
compressed natural gas to markets with stranded gas production or
stranded customer bases. He previously served as President and
Director of the Company's former subsidiary, ExproFuels, Inc. from
1994 through 1999. Mr. Gose also formerly served as Director, CEO and
President of Retamco Operating, Inc., (a large shareholder of the
Company) its predecessors and affiliates, from 1987 through 1998.
Thomas H. Gose is the son of Stephen M. Gose, Jr.
None of the nominees for director or executive officers of the Company
has a family relationship with any of the other nominees for director or
executive officers except that Thomas H. Gose is the son of Stephen M. Gose, Jr.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held a total of 10 meetings
during the calendar year ended December 31, 2000 and 4 meetings during the four
month transition period ended December 31, 1999. Effective in January 2000, the
Company changed its annual reporting period from a fiscal year ending August 31
to a calendar year ending December 31. The attendance by all directors at the
meetings of the Board and Board committees was 100%, except for one director who
missed one regularly scheduled meeting during the calendar year. All directors
attended at least 86% of the regular meetings of the Board and Board committees
of which they are members during the calendar year, while attendance was 100%
during the four month transition period.
The Board of Directors has two standing committees: the Audit Committee
and the Compensation Committee. Both committees were established in May 1997,
each with a majority of outside directors. The functions of the Audit Committee,
which is chaired by Michael J. Pint and includes Stephen M. Gose, Jr., Robert L.
Foree, Jr. and Alan L. Edgar (since May 2000) as members, are to make
recommendations to the Board regarding the engagement of the Company's
independent accountants and to review with management and the independent
accountants the Company's internal controls, financial statements, basic
accounting and financial policies and practices, audit scope and competency of
accounting personnel. The Audit Committee held seven meetings during 2000.
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The functions of the Compensation Committee, which is chaired by
Michael J. Pint and includes Stephen M. Gose, Jr., Robert L. Foree, Jr. and Alan
L. Edgar (since May 2000) as members, are to review and recommend to the Board
the compensation, stock options and employment benefits of all officers of the
Company, to administer the Company's 1995 Flexible Incentive Plan, to fix the
terms of other employee benefit arrangements and to make awards under such
arrangements. The Compensation Committee held 4 meetings during 2000. None of
the individuals serving on the Compensation Committee was an officer or employee
of the Company during 2000. No executive officer of the Company has served
during 2000 as a member of the board of directors or the compensation committee
of any other company whose executive officers include a member of the Board or
the Compensation Committee of the Company.
The Board does not have a formal Nominating Committee. The entire Board
of Directors acts as the nominating committee for directors and will consider
nominations by shareholders for directors. Any such nomination, together with a
statement of the nominee's qualifications and consent to be considered as a
nominee and to serve if elected, should be mailed to the Secretary of the
Company no later than December 31, 2001, to be included in the proxy statement
in connection with next year's Annual Meeting of Shareholders.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors has furnished the
following report:
The Company's Board of Directors has adopted a written charter for the
Audit Committee which is included as Appendix A to this proxy statement.
The Board has determined that each member of the Committee is
"independent" as defined in Rule 4200 (a)(15) of the NASD listing standards,
with the exception of Mr. Edgar. In February 2000, prior to his appointment to
the Board, Mr. Edgar was retained as a capital advisory consultant to the
Company and was paid advisory fees totaling $180,000 for services rendered in
the completion of a private placement of new common shares of the Company. Mr.
Edgar was appointed to the Board in May, 2000. The Board has determined, in
accordance with listing standards, that Mr. Edgar's service on the Audit
Committee is required by the best interests of the Company and its stockholders,
because, in the Board's opinion, he will exercise independent judgment and
materially assist the function of the Committee.
As noted in the Committee's charter, the Company's management is
responsible for preparing the Company's financial statements. The Company's
independent auditors are responsible for auditing the financial statements. The
activities of the Committee are in no way designed to supersede or alter those
traditional responsibilities. The Committee's role does not provide any special
assurances with regard to the Company's financial statements, nor does it
involve a professional evaluation of the quality of the audits performed by the
independent auditors.
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The Committee has reviewed and discussed the audited financial statements
with management. The Committee has discussed with the independent auditors,
Akin, Doherty, Klein & Feuge, P.C., the matters required to be discussed by
Statement of Auditing Standards No. 61, Communication with Audit Committees and
No. 90, Audit Committee Communications.
The Committee has received the written disclosures and the letter from
the independent auditors required by Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees, has considered the
compatibility of non-audit services with the auditors' independence, and has
discussed with the auditors the auditors independence. Based on the review and
discussions referred to above, the Committee recommended to the Board of
Directors that the audited consolidated financial statements be included in the
Company's Annual Report on Form 10-K for 2000 for filing with the Securities and
Exchange Commission. This report has been submitted by:
THE EXPLORATION COMPANY AUDIT COMMITTEE 2000 MEMBERS
Michael J. Pint, Stephen M. Gose, Jr., Robert L. Foree, Jr., Alan L. Edgar
Notwithstanding anything to the contrary set forth in any of the
Company's previous or future filings under the United States Securities Act of
1933 or the United States Exchange Act of 1934 that might incorporate this proxy
statement or future filings with the United States Securities and Exchange
Commission, in whole or in part, the foregoing report shall not be deemed to be
incorporated by reference into any such filing.
AUDITOR INDEPENDENCE
The Board has, in accordance with the recommendation of its Audit
Committee, chosen the firm of Akin, Doherty, Klein & Fuege, P.C. ("Akin
Doherty") as independent auditors for the Company. Representatives of Akin
Doherty are expected to be present, and be available to respond to appropriate
questions, at the annual meeting. They have the opportunity to make a statement
if they desire to do so; they have indicated that, as of this date, they do not.
Audit Fees: Akin Doherty's fees to date for our 2000 annual audit
and review of interim financial statements were $ 33,600.
Financial Information Systems Design and Implementation Fees: Akin
Doherty did not render any professional services in 2000 with respect to
financial information systems design and implementation fees.
All Other Fees: Akin Doherty's fees for all other professional
services rendered to us during 2000 were $34,740.
COMPENSATION OF DIRECTORS
Members of the Board of Directors who serve as Executive Officers of
the Company are not compensated for any services provided as a Director. Outside
(non-employee) Directors of the Company are paid a fee of $1,000 plus
reimbursement of related travel expenses for each board meeting physically
attended or $250 for telephonic attendance. Beginning in 1997, upon assuming
Director status, new outside directors have been awarded 10 year options
("Directors Options") for the purchase of 75,000 shares of Company common stock
at 110% of the stock's market value on the date of grant, with such options
vesting equally over their first three years of service.
During 2000, the Board of Directors unanimously approved a two
component strategy intended to re-align long term incentives for all of its
directors. This strategy was the result of the expansion of the number of seats
on the board by one and the election of a sixth director in May 2000. The
strategy provided for the issuance of Directors Options to the two directors
whose election to the Board predated the 1997 award regimen thereby precluding
their previous receipt of Directors Options. The second component included a
repricing of the exercise prices of existing Directors Options (those issued to
directors elected prior to 2000) equal to the exercise prices as granted the
newest outside director elected in May 2000.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following tables set forth the beneficial ownership of the
Company's Common Stock, its only outstanding class of equity security as of
March 15, 2001 of certain beneficial owners and management. Each of the persons
or entities listed has sole voting power and sole investment power with respect
to the shares listed opposite his or its name.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information concerning all persons known
to the Company to beneficially own five- percent (5%) or more of its Common
Stock. As of March 15, 2001 assuming 17,471,849 shares outstanding and
20,472,078 fully diluted shares:
Name and Address Shares of Common Stock Percent Owned Percent Owned
of Beneficial Owner Beneficially Owned Fully Diluted Outstanding
------------------- ------------------ ------------- -----------
C>
Thomas H. Gose 916,601 4.48% 5.25%
317 Morningside
San Antonio, Texas 78209
Stephen M. Gose, Jr. 1,080,127 (1) 5.28% 6.18%
HCR Box 1010 Hwy 212
Roberts, Montana 59070
Trianon Opus One, Inc. 1,350,500 6.60% 7.73%
Fohrenstrasse 25
CH-8703 Erlenbach
Switzerland
Swisspartners Investment 1,333,333 6.51% 7.63%
Network AG
Am Schanzengraben 23
PostFach 970
Switzerland
Tahoe Invest 1,190,000 5.81% 6.81%
Innere Guterstrasse 4
6304 Zug
Switzerland
(1) See footnote no. 3 on the following table, "Security Ownership of Directors
and Executive Officers" for details as to the composition of the beneficial
shares owned by Mr. Stephen M. Gose, Jr.
12
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of common stock
beneficially owned as of March 15, 2001 by each director, each executive officer
named in the Summary Compensation Table and by all directors and executive
officers as a group. Information provided is based on Forms 3,4, 5, stock
records of the Company and the Company's transfer agent.
Number of Shares Percent
Name Beneficially Owned Owned (1)
---- ------------------ --------
Stephen M. Gose, Jr. (3)(7) 1,080,127 5.83%
Thomas H. Gose (7) 916,601 5.25%
James E. Sigmon (2) 750,000 4.13%
Michael Pint. (4) 350,000 1.99%
Alan L. Edgar (5) 258,333 1.47%
Robert L. Foree, Jr. (4) 86,000 .49%
Roberto R. Thomae (6) 100,000 .57%
All Directors and Executive
Officers as a group 3,578,561 18.21%
(1) Except as otherwise noted, the Company believes that each named individual
has sole voting and investment power over the shares beneficially owned.
(2) The number of shares beneficially owned by Mr. Sigmon includes 50,000
shares owned directly and 700,000 shares of the Company's Common Stock
reserved for issuance through options issued under the Company's 1995
Flexible Incentive Plan.
(3) The number of shares beneficially owned by Mr. Gose, Jr. include 20,000
shares owned directly, plus his 100% interest, shared equally with his
spouse, in 1,060,127 shares owned by Retamco Operating, Inc.
(4) The number of shares beneficially owned by Mr. Pint and Mr. Foree each
includes 75,000 shares of the Company's Common Stock reserved for issuance
under non-qualified options issued to outside directors of the Company
exercisable at March 1, 2001 plus 275,000 and 11,000 respectively, of
directly owned shares.
(5) The number of shares beneficially owned by Mr. Edgar includes 125,000
shares owned directly and 133,333 shares of the Company's Common Stock
reserved for issuance under 5 year warrants, granted in February 2000, for
services rendered prior to his election as a director. None of the 75,000
shares reserved for issuance under non-qualified options received by Mr.
Edgar upon his appointment to the board were vested at March 1, 2001 and
accordingly are not included in his beneficially owned share total above.
(6) The number of shares beneficially owned by Mr. Thomae includes 100,000
shares of the Company's Common Stock reserved for issuance through options
issued under the Company's 1995 Flexible Incentive Plan.
(7) None of the 75,000 shares reserved for issuance under non-qualified options
received respectively by Mr. Stephen M. Gose, Jr. or Mr. Thomas H. Gose
during the year were vested at March 1, 2001 and accordingly are not
included in their beneficially owned share total above.
13
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors, executive officers, and persons who own more than ten
percent (10%) of the Common Stock file initial reports of ownership and reports
of changes in ownership of Common Stock with the Securities and Exchange
Commission ("SEC"). Officers, directors, and stockholders who own more than ten
percent (10%) of the Common Stock are required by the SEC to furnish the Company
with copies of all Section 16(a) reports they file. The company is required to
report in this Proxy Statement any failure of its directors and officers and
beneficial owners of more than ten percent (10%) of the Company's common stock
to file by the relevant due date any of these reports during the Company's
fiscal year. To the Company's knowledge, based on a review of such reports
available to the Company, the Company believes that all Section 16(a) filing
requirements applicable to its officers, directors, and ten percent (10%)
stockholders were complied with during the fiscal year ended December 31, 2000
and the four month transition period ended December 31, 1999.
EXECUTIVE OFFICERS
The Executive Officers of the Company serve at the discretion of the
Board of Directors and are chosen annually by the Board at its first meeting
following the Annual Meeting of Shareholders. The following table sets forth the
names and ages of the Executive Officers of the Company and all positions held
with the Company.
NAME AGE TITLE
- ---- --- -----
James E. Sigmon (1) 52 President and Chief Executive Officer
Director
Roberto R. Thomae (2) 50 Chief Financial Officer
Secretary/Treasurer, Vice-President-Finance
Richard A. Sartor (3) 48 Controller
(1) For a description of the business experience of Mr. James E. Sigmon see
"Election of Directors."
(2) Mr. Thomae has served as Secretary/Treasurer of the Company since March
1997 and Chief Financial Officer and Vice President-Finance since September
1996. From September 1995 through September 1996 he was a consultant to the
Company in a financial management capacity. From 1989 through 1995 Mr.
Thomae was self-employed as a management consultant primarily involved in
the development of domestic and international oil and gas exploration
projects and the marketing of refined products. He received a Bachelor of
Business Administration degree in accounting, with honors, from the
University of Texas at Austin in 1974.
(3) Mr. Sartor has served as Controller of the Company since April 1997. A
Certified Public Accountant since 1980, Mr. Sartor operated a private
practice from 1989 through March 1997. Mr. Sartor received a Master of
Business Administration degree from the University of Texas at San Antonio
in 1990 and a Bachelor of Business Administration degree from the
University of Texas at Austin in 1974.
14
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE AND THE BOARD OF DIRECTORS
The following report of the Board of Directors and the performance
graph that appears immediately after such report shall not be deemed to be
soliciting material or to be filed with the SEC under the Securities Act of 1933
or the Securities Exchange Act of 1934 or incorporated by reference in any
document so filed.
BOARD COMPENSATION REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors reviews and
approves the payment of compensation to all employees of the Company or its
subsidiaries. The Committee was expanded to four members, with a majority of
outside directors, with the May 2000 appointment of Alan L. Edgar. In addition,
the Committee approves all incentive compensation plans including, without
limitation, bonus plans, stock option plans and key employee compensation
agreements. The Committee administers the Company's 1985 Amended and Restated
Stock Option Plan (the "1985 Plan"). The Committee also administers stock
options granted under the 1995 Flexible Incentive Plan. The executive
compensation policies and practices are designed to provide competitive levels
of compensation that integrate pay with the Company's annual and long-term
performance goals. Compensation of the executive officers of the Company is
primarily comprised of base salary, long-term equity incentives, and
miscellaneous other fringe benefits.
COMPENSATION PHILOSOPHY AND OBJECTIVES
BASE SALARY: The base salaries of the executive officers are
established at levels deemed appropriate to attract and retain qualified
executives who are instrumental in helping the Company achieve its business
objectives. In establishing salaries, the Compensation Committee considers the
recommendations of management, the amount of responsibilities of the executive
officers, the salaries of others similarly situated within the Company, the
recent performance in the executive's area of responsibility, and any changes in
the cost-of-living. The Company also considers the competitiveness of the entire
compensation package in determining the level of salaries. The salaries of the
executive officers are reviewed annually and reflect the performances of the
past year. As a result, the salaries received in 2000 reflected the individual
performances in 1999 for officers who were with the Company during that year.
STOCK OPTION PLAN: The 1985 Plan and the 1995 Flexible Incentive Plan
were designed to align the long-term interests of key employees with
shareholders. The Plans currently set aside up to 400,000 and 1,500,000 shares,
respectively, of the Company's Common Stock to be available to be offered to
employees of the Company as a long-term incentive. The exercise price of such
options may not be less than 100% of the fair market value per share of the
15
Common Stock on the date of the grant. The number of options granted to any
individual is dependent on the individuals' level of responsibility and ability
to influence the performance of the Company. Existing options under the 1985
Plan are being administered by the Compensation Committee while no new options
may be granted under the terms of the 1985 Plan. The Compensation Committee also
administers the 1995 Flexible Incentive Plan.
FRINGE BENEFITS: From time to time, the Company makes available to key
employees and executives certain other fringe benefits. The Company may provide
club memberships, tickets to sporting or cultural events, tickets to community
events, etc. To the extent that such items are taxable to the individual they
are considered to be part of the individual's compensation package.
EXECUTIVE COMPENSATION: On September 23, 1999, the compensation of Mr.
James E. Sigmon, the Chief Executive Officer ("CEO"), was increased to $175,000
per year from the previous $150,000 per year subject to terms specified in an
employment agreement with the Company, as amended in 1994. The Compensation
Committee evaluates the CEO's contribution to the Company's long-term financial
and non-financial objectives. In addition, the Committee evaluates the
performance of the CEO based upon a variety of factors including the Company's
earnings per share, enhancement of asset values and quality and the extent to
which business plan goals are met or exceeded. The Committee does not assign
relative weights to any of the foregoing factors, but instead makes a subjective
determination based upon a consideration of all such factors. During 1998, the
CEO was awarded non-qualified incentive stock options to purchase 600,000 shares
at 110% of current market price at date of grant, under the terms of the 1995
Flexible Incentive Plan. The stock options vest and are exercisable in specified
amounts upon the Company's common stock attaining the following price levels:
200,000 shares at $5.00, 100,000 shares at $7.50, 100,000 shares at $10.00,
100,000 shares at $12.50 and 100,000 shares at $15.00. During 1996, The Board of
Directors granted to the CEO a one percent (1%) overriding royalty interest,
effective September 1, 1996, under all leases that the Company has acquired or
acquires while the CEO continues to serve in that capacity, proportionately
reduced to the Company's interest in such leases.
In summary, based on the performance of the Company during the past
several years, and in light of their efforts put forth directing the Company,
the Compensation Committee and the Board have determined that the compensation
paid to the CEO, as described in the Summary Compensation Table below, as well
as compensation paid to other Company officers, serves the best interests of the
Company's Shareholders and continue to emphasize programs that they believe
positively affect Shareholder value. This report is submitted by:
THE EXPLORATION COMPANY COMPENSATION COMMITTEE 2000 MEMBERS
Michael J. Pint, Stephen M. Gose, Jr., Robert L. Foree, Jr., Alan L. Edgar.
THE EXPLORATION COMPANY BOARD OF DIRECTORS 2000 MEMBERS
Stephen M. Gose, Jr., James E. Sigmon, Michael J. Pint, Robert L. Foree, Jr.,
Alan L. Edgar, Thomas H. Gose.
16
COMPARATIVE PERFORMANCE GRAPH. The following graph compares the
performance of the Company's common stock for the five-year period commencing
December 31, 1995 to (i) the NASDAQ market composite index ("NASDAQ-US") and
(ii) NASDAQ exploration and production companies comprised of approximately 42
active companies which trade on either the NASDAQ National Market System or the
NASDAQ Small-Cap Market. The graph assumes that a $100 investment was made in
the Company's common stock and each index on December 31, 1995, and that all
dividends were reinvested. Also included are the respective investment returns
based upon the stock and index values as of the end of each year during such
five-year period. The information was provided by the Center for Research in
Security Prices ("CRSP") of The University of Chicago Graduate School of
Business. The index of exploration and production companies used includes all
available NASDAQ stocks under SIC codes 1310-19 (companies engaged in oil and
gas exploration and production operations) actively traded on NASDAQ during the
comparative term. The list of comparative companies is available to shareholders
directly from CRSP or may be obtained at no cost from the Company by writing the
Company or telephoning (210) 496-5300 and requesting the information.
COMPANY MARKET PEER
DATE INDEX INDEX INDEX
---- ----- ----- -----
12/29/95 100 100 100
12/31/96 220 123 145
12/31/97 80 151 138
12/31/98 40 213 67
12/31/99 78 395 69
12/29/00 118 238 143
17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. There are
no interlocks between the members of the Board of Directors and other
corporations nor any material transactions between the Company and such members
except as set forth herein and under "Transactions with Management and Others."
SUMMARY COMPENSATION INFORMATION. The following table contains certain
information for each of the calendar and fiscal years and the 4 month transition
period ended as indicated with respect to the chief executive officer and those
executive officers of the Company as to whom the total annual salary and bonuses
exceed $100,000:
SUMMARY COMPENSATION TABLE
Name and Other Annual All Other
Principal Position Year Salary Bonuses Compensation Compensation
- ------------------ ---- ------ ------- ------------ ------------
James E. Sigmon 12/31/00 $175,000 $14,583 (1) $174,181 $402
President & CEO 12/31/99 (2) 57,899 -0- (1) 52,600 -0-
8/31/99 150,000 -0- (1) 56,678 419
8/31/98 132,000 -0- (1) 41,623 267
Roberto R Thomae 12/31/00 100,000 8,333 -0- 161
CFO & Secr/Treas 12/31/99 (2) 33,499 -0- -0- -0-
(1) Amounts represent income from an overriding royalty interest.
(2) Represent four month transition period for respective officer.
AGGREGATED OPTION/SAR EXERCISES
Number of Unexercised Value of Unexercised
# Shares Value Options/SARs Options/SARs (1)
Name Exercised Realized Exercisable Unexercisable Exercisable Unexercisable
-------------- --------- -------- ----------- ------------- ----------- -------------
Year Ended Dec 31, 2000:
James E. Sigmon (2) - - 100,000 600,000 $ 18,800 $ 48,780
Roberto R. Thomae - - 100,000 25,000 85,175 20,325
Four Month Period Ended Dec 31, 1999:
James E. Sigmon (2) - - 100,000 600,000 - -
(1) Value of unexercised options calculated as the difference in the stock
price at period end and the option price.
(2) 100,000 of Mr. Sigmon's unexercised options were exercisable as of December
31, 2000, and the remaining 600,000 options vest and are exercisable in
specified amounts upon the Company's common stock attaining the following
price levels: 200,000 shares at $5.00; 100,000 shares at $7.50; 100,000
shares at $10.00; 100,000 shares at $12.50 and 100,000 shares at $15.00.
18
EMPLOYMENT AGREEMENT. In September 1999, the Company amended an
employment agreement with its President, Mr. James E. Sigmon, which set his
salary at a minimum of $175,000 annually. During fiscal 1999, Mr. Sigmon's
salary was $150,000. In 1996, under the terms of the employment agreement, Mr.
Sigmon was granted a one percent (1%) overriding royalty interest in all leases
acquired by the Company during his term as President, proportionately reduced to
the Company's interest in such leases. Mr. Sigmon's Employment Agreement is
terminable upon ninety days notice but his right to the overriding royalty
interest is vested and cannot be terminated.
TRANSACTIONS WITH MANAGEMENT AND OTHERS. In December 1999, the Company
retained the consulting advisory services of Mr. Alan L. Edgar for the
identification of and negotiation assistance with potential sources of debt or
equity capital investment in the Company. In February 2000, the Company
completed the private placement of 1,333,333 shares of new common stock at a
price of $2.25 per share, with Mr. Edgar's assistance. Pursuant to the terms of
his consulting agreement, upon closing, Mr. Edgar received a 6% advisory fee
totaling $180,000 and 5 year warrants, exercisable at $3.00 per share, to
purchase 133,333 shares of the Company's common stock. Mr. Edgar was appointed
to the Company's Board of Directors in May, 2000.
In the opinion of the Board of Directors of the Company, the terms of
the transactions described above were as favorable as would be available from an
independent third party.
PROPOSAL II - AMENDMENT TO ESTABLISH A CLASSIFIED BOARD OF DIRECTORS
The Board of Directors, by resolution adopted on January 26, 2001
unanimously approved and recommended for approval by the Company's stockholders
an amendment to its Certificate of Incorporation (the "Certificate") that would
establish a classified board of directors. The affirmative vote of a majority of
the outstanding shares of the common stock is required for adoption of the
amendment. The classified board provisions are intended to promote management
continuity and stability and to afford time and flexibility in responding to
unsolicited tender offers.
A. DESCRIPTION OF CLASSIFIED BOARD PROVISIONS.
The proposed classified board provisions would divide the Board into
three classes of directors, with the number of directors in each class to be as
nearly equal as possible, and with each class to be elected for a three-year
term on a staggered basis. The present number of directors of the Company is
six. Classes A , B and C would have two directors each, with terms expiring in
the years 2002, 2003 and 2004, respectively. Directors elected at subsequent
annual meetings would serve three-year terms, and the term of one class would
expire each year. Under the amended certificate of incorporation, stockholders
would only be permitted to remove directors for cause. The Delaware General
Corporation Law provides that, unless a corporation's certificate of
incorporation specifically provides otherwise, if a corporation has a classified
board, the directors of the corporation may only be removed by the stockholders
for cause. The proposed amended Certificate will not have a provision allowing
removal of directors other than for cause.
19
As part of the classified board provisions, the amended Certificate
would also give the Board the exclusive power to fix the size of the Board and
require that any vacancies and newly created directorships will be filled
exclusively by vote of a majority of the directors then in office or the sole
remaining director. Any director so elected by the Board to fill a vacancy would
become a member of the same class as the director he or she succeeds and would
hold office for the remainder of the term of that class and until his or her
successor shall have been duly elected and qualified. These changes will prevent
someone from circumventing what the Board believes are the beneficial effects of
the adoption of a staggered board by increasing the size of the Board and
electing that person's hand-picked designees to fill the newly created
directorships.
If the stockholders approve the proposed classified board provisions,
the Company will amend the Certificate by filing an appropriate certificate with
the Delaware Secretary of State incorporating the provisions set forth in
Appendix B. To place the classes of directors on a staggered basis for purposes
of annual elections, the Directors in Class A and Class B will initially hold
office for one and two-year terms, respectively. The Directors in Class A, who
will initially serve a one-year term, will be eligible for re-election to a full
three-year term at the annual meeting of stockholders to be held in 2002. The
Directors in Class B, who will initially serve two-year terms, will be eligible
for re-election for full three-year terms at the annual meeting of stockholders
to be held in 2003. The Directors in Class C, who will initially serve full
three-year terms, will be eligible for re-election for new three-year terms at
the annual meeting of stockholders to be held in 2004. Each Director will serve
until a successor is duly elected and qualified or until his or her earlier
death, resignation or removal. If the classified board amendment is approved and
the incumbent directors are re-elected, Robert L. Foree, Jr. and Thomas H. Gose
will be elected as Class A directors, Stephen M. Gose, Jr. and Alan L. Edgar
will be elected as Class B directors, and James E. Sigmon and Michael J. Pint
will be elected as Class C directors.
Under the Delaware General Corporation Law, the board of directors may
amend the bylaws of a corporation if they are authorized to do so by the
corporation's certificate of incorporation. The Company's existing Certificate
provides that its Board of Directors has the authority to amend its bylaws. If
the classified board provisions are adopted, the Board of Directors intends to
make conforming revisions to the Company's bylaws.
B. OBJECTIVES AND POTENTIAL EFFECTS OF CLASSIFIED BOARD PROVISIONS.
The Board believes that dividing the Directors into three classes and
providing that the Directors will serve three-year terms rather than one-year
terms is in the best interest of the Company and its stockholders because it
should enhance the continuity and stability of the Company's management and the
policies formulated by the Board. At any given time, at least two-thirds of the
Directors will have one or more years of experience as Directors of the Company.
New Directors would therefore have an opportunity to become familiar with the
affairs of the Company and to benefit from the experience of other members of
the Board. Although the Board believes the Company has not experienced problems
with continuity and stability of leadership and policy in the past, it hopes to
avoid these problems in the future.
20
The Board also believes that classification will enhance the Company's
ability to attract and retain well-qualified individuals who are able to commit
the time and resources to understand the Company, its business affairs and
operations. The continuity and quality of leadership that results from a
classified Board should, in the opinion of the Board, promote the long-term
value of the Company.
The Board also believes that the classified board provisions are in the
best interests of the Company and its stockholders because they should, if
adopted, reduce the possibility that a third party could effect a sudden or
surprise change in control of the Board. With a classified board, it is more
likely that a potential acquirer will initiate any attempt to acquire control of
the Company through arm's-length negotiations with the Board. The classified
board provisions would help to ensure that the Board, if confronted by a hostile
tender offer, proxy contest or other surprise proposal from a third party, will
have sufficient time to review the proposal and appropriate alternatives to the
proposal and to act in a manner that it believes to be in the best interest of
the Company and its stockholders.
The classified board provisions do not provide for the removal of
directors "without cause". Allowing stockholders to remove a director without
cause could be used to subvert the protections afforded by the creation of a
classified Board. One method employed by takeover bidders to obtain control of a
board of directors is to seek to acquire a significant percentage of a
corporation's outstanding shares through a tender offer or open market purchases
and, at the same time, to run a proxy contest seeking to replace the incumbent
board with the hand-picked designees of the bidder who would be more willing to
approve the terms of a merger or other business combination on terms that might
be less favorable to the other stockholders of the Company than those which
would have been approved by the removed directors. Requiring cause to remove a
director precludes the use of this strategy, thereby encouraging potential
takeover bidders to obtain the cooperation of the existing Board before
attempting a takeover. Thus, the absence of a provision allowing stockholders to
remove a director without cause is consistent with the concept of a classified
board in its intended effect of moderating the pace of a change in the Board.
The classified board provisions will not prevent a negotiated acquisition of the
Company with the cooperation of the Board, and a negotiated acquisition could be
structured in a manner that would shift control of the Board to representatives
of the acquirer as part of the transaction.
C. POTENTIAL DISADVANTAGES OF CLASSIFIED BOARD PROVISIONS.
The classified board provisions will generally delay, deter or impede
changes in control of the Board or the approval of certain stockholder proposals
that might have the effect of facilitating changes in control of the Board, even
if the holders of a majority of the common stock may believe the changes or
actions would be in their best interests. For example, classifying the Board
would operate to increase the time required for someone to obtain control of the
Company without the cooperation or approval of the incumbent Board, even if that
person holds or acquires a majority of the voting power. Elimination of the
right of stockholders to remove directors without cause will make the removal of
any director more difficult (unless cause is readily apparent), even if a
21
majority of stockholders believe removal is in their best interest. As a result,
there is an increased likelihood that the classified board provisions could have
the effect of making it easier for directors to remain in office for reasons
relating to their own self interest. The classified board provisions may
discourage certain tender offers and other attempts to change control of the
Company, even though stockholders might feel those attempts would be beneficial
to them or the Company. Because tender offers for control usually involve a
purchase price higher than the prevailing market price, the classified board
provisions may have the effect of preventing or delaying a bid for the Company's
shares that could be beneficial to the Company and its stockholders. Even though
the adoption of the classified board provisions may have these potential
disadvantages, the Board believes that the various protections afforded to the
stockholders that will result from the adoption of the classified board
provisions will outweigh the potential disadvantages.
At this time the Board does not know of any offer to acquire control of
the Company, nor does it know of any effort to remove any director, either for
cause or without cause.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL II TO
- --------------------------------------------------------------------------------
AMEND THE CERTIFICATE OF INCORPORATION TO ESTABLISH A CLASSIFIED BOARD OF
- --------------------------------------------------------------------------------
DIRECTORS
- ---------
PROPOSAL III - AMENDMENT TO ELIMINATE THE POWER OF STOCKHOLDERS TO TAKE ACTION
BY WRITTEN CONSENT WITHOUT MEETING
The Board of Directors, by resolution adopted on January 26, 2001,
unanimously approved and recommended for approval by the Company's stockholders
amendments to its Certificate of Incorporation that would eliminate the right of
stockholders of the Company to act by written consent. The affirmative vote of a
majority of the outstanding shares of the common stock is required for adoption
of the amendment. The proposed amendments to the Certificate are intended to
ensure that all stockholders of the Company have notice of and a chance to
participate in corporate actions that, under the Delaware General Corporation
Law, require stockholder approval.
A. DESCRIPTION OF WRITTEN CONSENT AMENDMENTS.
Under the Delaware General Corporation Law, unless otherwise provided
in the certificate of incorporation, any action required or permitted to be
taken at any annual or special meeting of stockholders may be taken without
prior notice and without a stockholder vote at a stockholders meeting if a
consent in writing setting forth the action so taken is signed by the holders of
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon are present and vote. Delaware law authorizes a corporation to
include in its certificate of incorporation a provision to eliminate the right
of the stockholders to consent to corporate action by written consent. The
22
certificate of incorporation of the Company currently does not contain any
provision restricting or regulating stockholder action by written consent.
Consequently, unless the proposed amendment is approved, stockholders holding a
majority of the Company's stock could take significant corporate action without
giving all other stockholders notice or the opportunity to vote. The proposed
amendments to eliminate stockholder action by written consent are set forth in
Appendix B.
B. OBJECTIVES OF WRITTEN CONSENT AMENDMENTS.
The Company's Board of Directors believes that each decision of the
stockholders should be made by all stockholders and only after thoughtful
consideration of complete information. Information is provided to stockholders
through a proxy statement, and the period between delivery of the proxy
statement and the stockholder meeting provides time for consideration of
stockholder proposals. The Board of Directors believes that all stockholders,
not just stockholders executing a written consent, should have the opportunity
to participate in the decision-making process. This allows minority stockholders
to take whatever action they deem appropriate to protect their interests,
including seeking to persuade majority stockholders to follow a different
course, selling their shares or litigation.
C. POTENTIAL DISADVANTAGES OF WRITTEN CONSENT AMENDMENTS.
The proposed amendment will have the effect of preventing the
stockholders of the Company from taking action at any time other than an annual
meeting (or a special meeting authorized by the Board or other authorized
persons) to replace directors or take any other action authorized to be taken by
stockholders under Delaware law. This amendment may make more difficult, or
delay, actions by a person or a group seeking to acquire a substantial
percentage of the Company's common stock, to replace directors on the Board or
to take other action to influence or control the Company's management or
policies, even though the holders of a majority of the outstanding shares of the
Company's common stock might desire those actions.
The Board has no knowledge of any current unsolicited effort by any
party to accumulate common stock of the Company with a view to gaining control,
and the amendment is not being proposed in response to any such action.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL
- --------------------------------------------------------------------------------
OF PROPOSAL III TO ELIMINATE STOCKHOLDER ACTION BY WRITTEN CONSENT.
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23
PROPOSAL IV - AMENDMENT TO 1995 FLEXIBLE INCENTIVE PLAN
In the Annual Meeting of Shareholders of the Company held on April 28,
1995, shareholders of the Company approved the 1995 Flexible Incentive Plan (the
"Plan") that became effective as of January 1, 1995. The purposes of the Plan
are to enable the Company to attract, motivate and retain highly talented
officers, directors, managers and other key employees by enabling the Company to
make awards that recognize the creation of long-term value for the Company's
shareholders and promote the continued growth and success of the Company. To
accomplish this purpose, the Plan provides for the granting to eligible persons
of stock options, stock appreciation rights, restricted stock, performance
awards, performance stock, dividend equivalent rights and any combination
thereof.
At the plan inception, no more than 400,000 shares of Common Stock
could be issued by the Company with respect to awards granted under the Plan.
This 400,000-share limitation was written into the Plan in 1995 to conform with
securities industry guidelines specifying that shares available for issuance
under an issuer's stock option plan not exceed ten percent (10%) of the issuer's
issued and outstanding common stock. Due to the Company's growth over the next
four years, the Plan was amended by a vote of the shareholders in 1999,
increasing the share limitation to 1,500,000 shares with respect to awards
grantable under the plan, as the Company by then had approximately 15,613,000
shares of Common Stock issued and outstanding. Due to the increased
capitalization and the correspondingly increased profitability of the Company by
2000, the Company now has approximately 17,471,000 shares of Common Stock issued
and outstanding. Accordingly, the Company can now increase shares available for
award under the Plan in conformity with securities industry guidelines.
The Board of Directors unanimously recommends that the shareholders
approve an amendment to the Plan to increase by 200,000 from the current limit
of 1,500,000 to 1,700,000 the maximum number of shares that may be issued with
respect to awards to eligible persons under the Plan. This proposed amendment
will be accomplished by simply changing the number "1,500,000" to "1,700,000" in
Section 4.1 of the Plan.
The Board of Directors believes this amendment to be in the best
interest of the Company and its shareholders. Due to the expansion and success
of the Company since 1999, the number of persons eligible to receive awards
under the Plan has increased significantly, and the Company's need for highly
experienced and skilled personnel has also increased significantly. The Board of
Directors believes the additional shares authorized for issuance in connection
with awards under the Plan are essential to retain existing personnel and
attract new personnel.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL IV
- --------------------------------------------------------------------------------
FOR THE ADOPTION OF THE AMENDMENT TO THE 1995 FLEXIBLE INCENTIVE PLAN TO
- --------------------------------------------------------------------------------
INCREASE TO 1,700,000 THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK THAT MAY BE
- --------------------------------------------------------------------------------
ISSUED WITH RESPECT TO AWARDS UNDER THE PLAN.
- ---------------------------------------------
24
PROPOSAL V- RATIFY APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Akin, Doherty, Klein & Feuge, P.C.
("Akin Doherty") as independent certified public accountants for the Company for
calendar year 2001. Akin Doherty has acted in the same capacity since 1995.
A representative of Akin Doherty is expected to attend the Meeting,
will have the opportunity to make a statement if he decides to do so, and will
be available to answer questions. Although law does not require the submission
of this matter to the shareholders, the Board of Directors will reconsider its
selection of independent accountants if this appointment is not ratified by the
shareholders. Ratification will require the affirmative vote of the majority of
the shares of Common Stock represented at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
- --------------------------------------------------------------------------------
RATIFICATION OF THE AUDITORS.
- -----------------------------
SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
It is anticipated that the 2002 Annual Meeting of Shareholders will be
held on May 31, 2002. Proposals of shareholders intended to be presented at the
2002 Annual Meeting must be received in writing by the Secretary of the Company
at its principal offices, 500 North Loop 1604 East, Suite 250, San Antonio,
Texas, 78232, not later than December 31, 2001.
OTHER MATTERS
No other business other than the matters set forth in this Proxy
Statement is expected to come before the meeting, but should any other matters
requiring a vote of shareholders arise, including a question of adjourning the
Meeting, the persons named in the accompanying proxy will vote thereon according
to their best judgment in the interests of the Company. In the event that any of
the nominees for director should withdraw or otherwise become unavailable for
reasons not presently known, the persons named as proxies in the accompanying
proxy will vote or refrain from voting for other persons in their place in what
they consider the best interests of the Company.
The foregoing Notice and Proxy Statement are sent by order of the Board
of Directors.
/S/ Roberto R. Thomae
Chief Financial Officer
Secretary/Treasurer
Vice President-Finance
April 6, 2001
San Antonio, Texas
STOCKHOLDERS ARE URGED, REGARDLESS OF THE NUMBER OF SHARES OF COMMON
STOCK OWNED, TO VOTE BY TELEPHONE, INTERNET OR TO DATE, SIGN, AND RETURN THE
ENCLOSED PROXY. YOUR COOPERATION IN GIVING THESE MATTERS YOUR IMMEDIATE
ATTENTION AND IN RETURNING YOUR PROXY PROMPTLY IS GREATLY APPRECIATED.
25
------------------------
FRONT SIDE OF PROXY CARD
------------------------
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE EXPLORATION COMPANY OF DELAWARE, INC.
Stephen M. Gose, Jr., Michael J. Pint, Robert L. Foree, Jr., Alan L. Edgar,
James E. Sigmon and Thomas H. Gose or any of them, with power of substitution of
each, are hereby authorized to represent the undersigned at the Annual Meeting
of Shareholders of The Exploration Company, to be held at The Petroleum Club of
San Antonio, 8620 North New Braunfels Avenue, San Antonio, Texas, on Friday, May
25, 2001, at 10:am., and any adjournment thereof, and to vote the number of
shares which the undersigned would be entitled to vote if personally present.
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS RECOMMENDATION JUST SIGN THE
REVERSE SIDE; NO BOXES NEED TO BE CHECKED.
UNLESS VOTING ELECTRONICALLY OR BY PHONE,
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
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SEE REVERSE SEE REVERSE
SIDE SIDE
- ----------- ------------
26
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BACK SIDE OF PROXY CARD
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[X] Please mark votes as in this example.
This proxy will be voted as you direct below. In the absence of such
direction, it will be voted FOR all of the Directors and FOR each of the
Proposals below.
1. To elect six nominees to the Board of Directors, to serve until their
successors are duly elected and qualified:
Nominees: Stephen M. Gose, Jr., Michael J. Pint, Robert L. Foree, Jr.,
Alan L. Edgar, James E. Sigmon and Thomas H. Gose
FOR [ ] WITHHELD [ ]
[ ] ---------------------------------------
For all nominees except as noted above
2. Proposal to amend the Company's Certificate of Incorporation that would
establish a classified board of directors, as more fully described in
the Proxy statement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to amend the Company's Certificate of Incorporation that would
eliminate The right of stockholders of the Company to act by written
consent, as more fully described in the Proxy statement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Proposal to amend the Company's 1995 Flexible Incentive Plan to
increase by 200,000 the maximum number of shares of Common Stock that
may be issued with respect to awards under the Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. Proposal to Ratify the appointment of Akin, Doherty, Klein & Feuge,
P.C. certified public accountants, as independent auditors for the
Company and its subsidiaries for the calendar year ending December 31,
2001; and
FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. To transact any other business as properly may come before the meeting
or any adjournment thereof.
PLEASE DO NOT FOLD OR MUTILATE THIS CARD.
NOTE: Please sign exactly as name appears. Joint owners should each sign.
Executor, Administrator, or Guardian, please give full title as such. If signer
is a corporation, please sign with the full corporation name by duly authorized
officer or officers.
SIGNATURE:______________________DATE:___________________________
SIGNATURE:______________________DATE:___________________________