SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
[AMENDMENT NO. ]
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SPINNAKER EXPLORATION COMPANY
- -------------------------------------------------------------------------------
(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 O-11.
1) Title of each class of securities to which transaction applies:
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Exchange Act Rule O-11 (Set forth the amount on which the filing fee is
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule O-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:
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[Spinnaker Exploration Company Logo]
SPINNAKER EXPLORATION COMPANY
Houston, Texas
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Tuesday, May 23, 2000
To the Stockholders:
The 2000 Annual Meeting of Stockholders (the "Annual Meeting") of Spinnaker
Exploration Company, a Delaware corporation (the "Company"), will be held on
Tuesday, May 23, 2000, at 9:00 a.m., local time, at the DoubleTree Hotel at
Allen Center, 400 Dallas Street at Bagby, Houston, Texas, for the following
purposes:
(1) To elect seven directors to serve until the 2001 Annual Meeting of
Stockholders;
(2) To ratify the selection of Arthur Andersen LLP as independent public
accountants of the Company for the fiscal year ending December 31, 2000;
and
(3) To transact such other business as may properly come before such
meeting or any adjournment(s) thereof.
The close of business on March 31, 2000 has been fixed as the record date
for the determination of stockholders entitled to receive notice of and to
vote at the Annual Meeting or any adjournment(s) thereof.
You are cordially invited to attend the Annual Meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, WE ASK THAT YOU SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors
/s/ James M. Alexander
James M. Alexander
Secretary
April 13, 2000
[Spinnaker Exploration Company Logo]
SPINNAKER EXPLORATION COMPANY
1200 Smith Street, Suite 800
Houston, Texas 77002
(713) 759-1770
----------------
PROXY STATEMENT
----------------
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of Directors
(the "Board of Directors") of Spinnaker Exploration Company, a Delaware
corporation (the "Company"), for use at the 2000 Annual Meeting (the "Annual
Meeting") to be held on Tuesday, May 23, 2000, at 9:00 a.m., local time, at
the DoubleTree Hotel at Allen Center, 400 Dallas Street at Bagby, Houston,
Texas or at any adjournment(s) thereof. The solicitation of proxies by the
Board of Directors will be conducted primarily by mail. In addition, officers,
directors and employees of the Company may solicit proxies personally or by
telephone, telegram or other forms of wire or facsimile communication. The
Company will reimburse brokers, custodians, nominees and fiduciaries for
reasonable expenses incurred by them in forwarding proxy material to
beneficial owners of common stock of the Company ("Common Stock"). The costs
of the solicitation will be borne by the Company. This proxy statement and the
form of proxy were first mailed to stockholders of the Company on or about
April 13, 2000.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy (a) by execution and submission of a
revised proxy, (b) by written notice to the Secretary of the Company or (c) by
voting in person at the Annual Meeting. In the absence of such revocation,
shares represented by the proxies will be voted at the Annual Meeting.
At the close of business on March 31, 2000, the record date for the
determination of stockholders entitled to notice of and to vote at the Annual
Meeting, there were outstanding 20,464,296 shares of Common Stock. Each
stockholder is entitled to one vote for each share of Common Stock. The Common
Stock is the only class of outstanding securities of the Company entitled to
notice of and to vote at the Annual Meeting. In order to transact business at
the Annual Meeting, a quorum consisting of a majority of all outstanding
shares entitled to vote must be present. Abstentions and proxies returned by
brokerage firms for which no voting instructions have been received from their
principals will be counted for the purpose of determining whether a quorum is
present.
The Company's annual report to stockholders for the year ended December 31,
1999, including financial statements, has been mailed to all stockholders
entitled to vote at the Annual Meeting. The annual report does not constitute
a part of the proxy soliciting material.
ELECTION OF DIRECTORS
Seven directors are to be elected at the Annual Meeting. The nominees for
election as directors are Roger L. Jarvis, Bjarte Bruheim, Jeffrey A. Harris,
Reidar Michaelsen, Howard H. Newman, Michael E. McMahon and Sheldon R.
Erikson. If elected, each director will serve until the Company's 2001 Annual
Meeting of Stockholders and until his successor shall have been elected and
qualified. Each of the nominees for director
1
currently serves as a director of the Company. All of the directors are
required to stand for election at the Annual Meeting because directors hold
annual terms. The affirmative vote of the holders of a majority of the Common
Stock present or represented by proxy and entitled to vote at the Annual
Meeting is required to elect a director. Accordingly, abstentions and "broker
non-votes" would have the same effect as a vote against a director. A broker
non-vote occurs if a broker or other nominee does not have discretionary
authority and has not received instructions with respect to a particular item.
Stockholders may not cumulate their votes in the election of directors.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed proxy will be voted FOR the election of the nominees listed below.
Although the Board of Directors does not contemplate that any of the nominees
will be unable to serve, if such a situation arises prior to the Annual
Meeting, the persons named in the enclosed proxy will vote for the election of
such other person(s) as may be nominated by the Board of Directors.
The following table sets forth information regarding the names, ages as of
March 31, 2000, principal occupations of the nominees, directorships in
certain other companies held by them and the length of continuous service as a
director of the Company.
Director
Nominees Principal Occupation and Directorships Since Age
-------- ------------------------------------------ -------- ---
Roger L. Jarvis..... Chairman of the Board, President and Chief 1996 46
Executive Officer of the Company
Bjarte Bruheim...... President and Chief Operating Officer, 1996 44
Petroleum Geo-Services ASA
Jeffrey A. Harris... Member and Managing Director, E.M. 1996 44
Warburg, Pincus &
Co., LLC; General Partner, Warburg, Pincus
& Co.; Director, Industri-Matematik
International, ECsoft Group plc and Knoll,
Inc.
Reidar Michaelsen... Chairman of the Board and Chief Executive 1996 56
Officer, Petroleum
Geo-Services ASA
Howard H. Newman.... Member and Managing Director, E.M. 1996 52
Warburg, Pincus & Co., LLC; General
Partner, Warburg, Pincus & Co.; Director,
ADVO, Inc., Newfield Exploration Company,
EEX Corporation, RenaissanceRe Holdings,
Ltd., Cox Insurance Holdings, Plc and
Eagle Family Foods Holdings, Inc.
Michael E. McMahon.. Partner, RockPort Partners LLC; Director, 1999 52
Triton Energy Limited
Sheldon R. Erikson.. Chairman of the Board, President and Chief 2000 58
Executive Officer, Cooper Cameron
Corporation; Director, Triton Energy
Corporation, Layne Christensen Co.,
National Ocean Industries Association,
Petroleum Equipment Suppliers Association,
American Petroleum Institute
Each of the nominees has been engaged in the principal occupation set forth
opposite his name for the past five years except as follows:
Mr. McMahon was a Managing Director of Chase Securities, Inc., from July
1997 to June 1998. From October 1994 until July 1997, Mr. McMahon was a
Managing Director of Lehman Brothers.
Directors' Meetings and Committees of the Board of Directors
The Board of Directors currently has seven members. Prior to the initial
public offering on October 4, 1999, the Company's stockholders entered into an
agreement to elect the Board of Directors, electing two members designated by
Petroleum Geo-Services ASA ("PGS"), two members designated by Warburg, Pincus
Ventures, L.P. ("Warburg") and one member designated by the Company's chief
executive officer. This agreement
2
terminated on completion of the initial public offering on October 4, 1999.
The Company's directors are elected annually and hold office until the next
annual meeting of stockholders and until their successors are duly elected and
qualified.
The Board of Directors held six meetings during 1999 and executed three
unanimous consents in lieu of meetings. During 1999, each of the directors,
except Mr. Bruheim, attended at least 75% of the aggregate of (i) the total
number of meetings of the Board of Directors held during the period that such
director served as a director and (ii) the total number of meetings held by
all committees of the Board of Directors on which such director served during
the period that such director so served.
The Board of Directors has the following standing committees:
Audit Committee. The Audit Committee, which currently consists of Messrs.
McMahon, Erikson and Harris, met once during 1999. Mr. McMahon serves as
Chairman of the Audit Committee. The Audit Committee is responsible for:
. recommending the selection of the Company's independent public
accountants;
. reviewing and approving the scope of the Company's independent public
accountants' audit activity and the extent of non-audit services;
reviewing with management and the independent public accountants the
adequacy of the Company's basic accounting systems and the effectiveness
of its internal audit plan and activities;
. reviewing the Company's consolidated financial statements with management
and the independent public accountants and exercising general oversight
of its financial reporting process; and
. reviewing the Company's litigation and other legal matters that may
affect its financial condition and monitoring compliance with its
business ethics and other policies.
Compensation Committee. The Compensation Committee, which currently
consists of Messrs. Harris, Bruheim, Erikson, McMahon, Michaelsen and Newman,
met twice during 1999. Mr. Harris is the Chairman of the Compensation
Committee. The Compensation Committee is responsible for:
. administering and granting awards under the 1998 Amended and Restated
Stock Option Plan and the 1999 Stock Incentive Plan;
. reviewing the compensation of the Company's Chief Executive Officer and
recommendations of the Chief Executive Officer as to appropriate
compensation for the other executive officers and key personnel;
. examining periodically the general compensation structure; and
. supervising the Company's welfare and pension plans and compensation
plans.
Risk Management Committee. The Risk Management Committee, which consists of
Messrs. Jarvis and Newman, met once during 1999. The Risk Management Committee
is responsible for monitoring the hedging program and adherence to the hedging
policy.
The Board of Directors currently has no nominating committee or committee
performing a similar function.
Compensation of Directors
The Company paid no compensation to any non-employee director prior to the
initial public offering on October 4, 1999. Following this date, non-employee
directors unaffiliated with Warburg or PGS are granted options pursuant to the
1999 Stock Incentive Plan to purchase 16,000 shares of Common Stock at fair
market value, as defined, upon appointment to the Board of Directors, with 20%
vesting on the date of grant and 20% vesting on each anniversary of the grant
date. These directors are also awarded options to purchase 16,000 shares of
Common Stock at fair market value, as defined, annually on the date of the
annual meeting of stockholders, with 20% vesting on the date of grant and 20%
vesting on each anniversary of the grant date. In addition, these
3
directors will be granted 600 options quarterly during the year commencing
upon the Annual Meeting that will vest 100% on the date of grant. In 1999, the
Company granted options to purchase 16,000 shares of Common Stock to Mr.
McMahon. Non-employee directors are also reimbursed for out-of-pocket expenses
incurred to attend board and committee meetings.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, unless otherwise
indicated, as of March 31, 2000, regarding beneficial ownership of Common
Stock of the Company by (i) each person known by the Company to own
beneficially 5% or more of its outstanding Common Stock, (ii) the Company's
Chief Executive Officer and each of the Company's other four most highly
compensated executive officers, (iii) each director and (iv) all executive
officers and directors as a group.
Beneficial Ownership(2)
---------------------------
Name of Beneficial Owner Shares Percent
------------------------ -------------- ------------
Warburg, Pincus Ventures, L.P.(1)(3)................ 6,800,585 33.2%
Petroleum Geo-Services ASA(1)(4).................... 5,388,743 26.3
Strong Capital Management, Inc.(1)(5)............... 1,154,700 5.6
Roger L. Jarvis..................................... 953,845 4.5
James M. Alexander.................................. 443,603 2.1
William D. Hubbard.................................. 237,776 1.1
Kelly M. Barnes..................................... 123,071 *
L. Scott Broussard.................................. 43,716 *
Bjarte Bruheim(4)................................... 5,393,743 26.4
Jeffrey A. Harris(3)................................ 6,800,585 33.2
Reidar Michaelsen(4)................................ 5,393,743 26.4
Howard H. Newman(3)................................. 6,800,585 33.2
Michael E. McMahon.................................. 18,875 *
Sheldon R. Erikson.................................. 3,800 *
Executive officers and directors as a group
(consisting of 12 persons)......................... 14,033,414 63.6
- --------
* Represents beneficial ownership of less than 1%.
(1) The address of Warburg is 466 Lexington Avenue, New York, New York 10017.
The addresses of PGS are Strandveien 50E, P.O. Box 89, N-1325 Lysaker,
Norway and 16010 Barker's Point Lane, Suite 600, Houston, Texas 77079. The
address of Strong Capital Management, Inc. is 100 Heritage Reserve,
Menomonee Falls, Wisconsin 53051.
(2) Pursuant to the rules and regulations promulgated under the Securities
Exchange Act of 1934, shares are deemed to be "beneficially owned" by a
person if he directly or indirectly has or shares the power to vote or
dispose of such shares, whether or not he has any pecuniary interest in
such shares, or if he has the right to acquire the power to vote or
dispose of such shares within 60 days, including any right to acquire such
power through the exercise of any option, warrant or right. The shares
beneficially owned by Messrs. Jarvis, Alexander, Hubbard, Barnes,
Broussard, McMahon and Erikson include 855,606, 343,220, 215,392, 112,999,
42,440, 4,400 and 3,800 shares, respectively, that may be acquired by such
persons within 60 days through the exercise of stock options. The shares
owned by the executive officers and directors as a group include 1,587,257
shares that may be acquired by such persons within 60 days through the
exercise of stock options.
(3) The sole general partner of Warburg is Warburg, Pincus & Co., a New York
general partnership. E. M. Warburg, Pincus & Co., LLC, a New York limited
liability company, manages Warburg. The members of E. M. Warburg, Pincus &
Co., LLC are substantially the same as the partners of Warburg, Pincus &
Co. Lionel I. Pincus is the managing partner of Warburg, Pincus & Co. and
the managing member of E. M. Warburg, Pincus & Co., LLC and may be deemed
to control both Warburg, Pincus & Co. and E. M. Warburg, Pincus
4
& Co., LLC. Messrs. Harris and Newman are Managing Directors and members of
E.M. Warburg, Pincus & Co., LLC and general partners of Warburg, Pincus &
Co. All shares indicated as owned by Messrs. Harris and Newman are included
because of their affiliation with the Warburg, Pincus entities. Messrs.
Harris and Newman disclaim beneficial ownership of the shares owned by
Warburg.
(4) The shares are owned directly by PGS or by a wholly owned subsidiary of
PGS. Mr. Michaelsen serves as Chairman of the Board and Chief Executive
Officer and Mr. Bruheim serves as President and Chief Operating Officer of
PGS. As such, Messrs. Michaelsen and Bruheim may be deemed to have an
indirect pecuniary interest in an indeterminate portion of the shares
beneficially owned by PGS. Messrs. Michaelsen and Bruheim disclaim
beneficial ownership of the securities owned by PGS.
(5) Based solely on the Schedule 13G dated January 25, 2000 and filed jointly
with the Securities and Exchange Commission (the "Commission") on behalf
of Strong Capital Management, Inc., an Investment Adviser registered under
Section 203 under the Investment Advisors Act of 1940, and Mr. Richard S.
Strong, Chairman of the Board and principal shareholder of Strong Capital
Management, Inc. Strong Capital Management, Inc. has voting and
dispositive power with respect to 602,100 and 1,154,700 shares,
respectively. Mr. Strong could be deemed to have voting and/or investment
power with respect to the shares beneficially owned by Strong Capital
Management, Inc.
MANAGEMENT
The following table sets forth certain information with respect to the
executive officers of the Company as of March 31, 2000. The Company's
executive officers serve at the discretion of the Company's Board of
Directors.
Name Age Position
------------------------------------ --- ------------------------------------
Roger L. Jarvis..................... 46 Chairman, President, Chief Executive
Officer and Director
James M. Alexander.................. 48 Vice President, Chief Financial
Officer and Secretary
William D. Hubbard.................. 56 Vice President--Exploration
L. Scott Broussard.................. 42 Vice President--Drilling and
Production
Kelly M. Barnes..................... 46 Vice President--Land
Jeffrey C. Zaruba................... 36 Treasurer
- --------
Roger L. Jarvis has served as President, Chief Executive Officer and
Director of Spinnaker since 1996 and as Chairman of Spinnaker since 1998. From
1986 to 1994, Mr. Jarvis served in various capacities with King Ranch Inc. and
its subsidiary, King Ranch Oil and Gas, Inc., including Chief Executive
Officer, President and Director of King Ranch Inc. and Chief Executive Officer
and President of King Ranch Oil and Gas, Inc., where he expanded its
activities in the Gulf of Mexico.
James M. Alexander has served as Vice President, Chief Financial Officer
and Secretary of Spinnaker since 1996. From 1994 to 1995, Mr. Alexander served
as Chief Financial Officer and then President of Enron Global Power and
Pipeline L.L.C. From 1995 to 1996, he served as President of Alexander
Consulting. Mr. Alexander is a director of Dril-Quip, Inc.
William D. Hubbard has served as Vice President--Exploration of Spinnaker
since 1996. He served as Senior Vice President--Exploration at Global Natural
Resources Corp. from 1992 to 1996, where he was responsible for both onshore
and offshore exploration.
L. Scott Broussard has served as Vice President--Drilling and Production of
Spinnaker since August 1999 after joining the Company as Operations Manager in
1998. Mr. Broussard served as Vice President and co-owner of HTK Consultants,
Inc., an engineering consulting firm, from 1994 to 1998.
Kelly M. Barnes has served as Vice President--Land of Spinnaker since 1997.
From 1992 to 1997, he served as Vice President--Land and Assistant Corporate
Secretary of Global Natural Resources Corporation of Nevada and its affiliated
corporations.
5
Jeffrey C. Zaruba has served as Treasurer since joining Spinnaker in August
1999. From 1992 to 1999, Mr. Zaruba served as Assistant Controller and held
various financial and tax reporting positions with Cliffs Drilling Company,
which merged with R&B Falcon Corporation in 1998.
Employment Agreements
Mr. Jarvis entered into an employment agreement with Spinnaker effective
December 20, 1996. The agreement provides that Mr. Jarvis will receive a
minimum annual base salary equal to $250,000. Under the agreement, Mr. Jarvis
also may receive bonuses, at the discretion of the Board of Directors, and
will be allowed to participate in all benefit plans offered by Spinnaker to
similarly situated employees.
Either the Board of Directors or Mr. Jarvis can terminate the employment
agreement at any time. If the employment agreement, which has an initial term
ending on December 31, 2000, is not terminated on or before December 15, 2000,
or on or before each December 15th thereafter, the term of the agreement shall
automatically be extended for one additional year. If the Company terminates
the employment agreement prior to the expiration of the initial term without
cause or if Mr. Jarvis terminates his employment prior to the expiration of
the initial term for good reason, then the Company will continue to pay his
then current base salary and continue, at the Company's cost, his coverages
under the Company's group health plans, for the greater of the balance of the
initial term or one year. In addition, if any payment or distribution by
Spinnaker or its affiliates to Mr. Jarvis is subject to Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), Spinnaker is required
to compensate him for the amount of any excise tax imposed on any payments or
distributions pursuant to Section 4999 of the Code and for any taxes imposed
on that additional payment. Section 4999 of the Code addresses additional
taxes payable in the event of a change in control of Spinnaker.
Mr. Alexander entered into an employment agreement with Spinnaker effective
December 20, 1996. The agreement provides that he will receive a minimum
annual base salary equal to $175,000. The other terms of Mr. Alexander's
employment agreement are substantially similar to the terms of Mr. Jarvis'
employment agreement.
Mr. Hubbard entered into an employment agreement with Spinnaker effective
December 20, 1996. The agreement provides that he will receive a minimum
annual base salary equal to $165,000. The other terms of Mr. Hubbard's
employment agreement are substantially similar to the terms of the employment
agreements described above. However, on December 31, 1998, Mr. Hubbard's
employment agreement became a year-to-year employment agreement. As a result,
if his employment is not terminated before December 15, 2000, and on each year
thereafter, the term of the agreement will automatically be extended for one
additional year.
Mr. Barnes entered into an employment agreement with Spinnaker effective
December 20, 1996. The agreement provides that he will receive a minimum
annual base salary equal to $110,000. The other terms of Mr. Barnes'
employment agreement are substantially similar to the terms of Mr. Hubbard's
employment agreement.
6
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation of the Chief Executive Officer of the Company and each of its
four other most highly compensated executive officers (collectively, the
"named executive officers") for the years ended December 31, 1999, 1998 and
1997. All information presented in this section is restated to reflect the
two-for-one split of the Company's outstanding Common Stock effected in
September 1999.
Summary Compensation Table
Long-Term
Compensation
Awards
Annual ------------
Compensation Securities
Name and Principal ----------------- Underlying All Other
Position Year Salary Bonus(1) Options Compensation(2)
- ------------------ ---- -------- -------- ------------ ---------------
Roger L. Jarvis........... 1999 $265,000 $134,000 236,529 $750
Chairman, President and 1998 265,000 91,498 -- 750
Chief Executive Officer 1997 250,000 50,000 -- 317
James M. Alexander........ 1999 184,000 65,000 95,898 $750
Vice President, Chief 1998 184,000 67,342 -- 750
Financial Officer and 1997 175,000 40,000 -- 317
Secretary
William D. Hubbard........ 1999 175,000 60,000 59,960 $750
Vice President-- 1998 175,000 56,042 -- 750
Exploration 1997 165,000 35,000 248,000 317
L. Scott Broussard........ 1999 137,700 62,100 23,798 $750
Vice President--Drilling 1998 112,500 43,233 52,800 625
and Production 1997 -- -- -- --
Kelly M. Barnes........... 1999 118,000 41,300 63,593 $750
Vice President--Land 1998 118,000 37,789 -- 750
1997 110,000 30,000 111,600 317
- --------
(1) Represents annual bonus earned for the fiscal year noted, even if such
bonus was paid in the following year.
(2) The All Other Compensation column includes the dollar value of insurance
premiums paid by the Company with respect to term life insurance for the
benefit of the named executive officer.
7
Stock Options Granted in 1999
The following table contains information concerning stock options granted
to the named executive officers in 1999.
Individual Grants Potential Realizable
----------------------------------------- Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options Exercise Price Appreciation
Underlying Granted to Price for Option Terms(3)
Options Employees Per Expiration ---------------------
Name Granted(1) In 1999(2) Share Date 5% 10%
---- ---------- ---------- -------- ---------- ---------- ----------
Roger L. Jarvis......... 236,529 27.3% $14.50 10/04/09 $2,156,901 $5,466,012
James M. Alexander...... 95,898 11.1% 14.50 10/04/09 874,491 2,216,132
William D. Hubbard...... 59,960 6.9% 14.50 10/04/09 546,774 1,385,632
L. Scott Broussard...... 5,000 0.6% 15.63 01/15/09 49,132 124,511
18,798 2.2% 14.50 10/04/09 171,418 434,408
Kelly M. Barnes......... 30,000 3.5% 15.63 01/15/09 294,794 747,067
33,593 3.9% 14.50 10/04/09 306,334 776,310
- --------
(1) The options expire ten years from the date of grant and vest 20% on the
grant date and 20% on each anniversary of the grant date.
(2) The Company granted options representing 866,574 shares in 1999.
(3) Calculated based upon the indicated rates of appreciation, compounded
annually, from the date of grant to the end of each option term. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent upon the future performance of the Common Stock and overall
market conditions. There can be no assurance that the amounts reflected in
this table will be achieved. The calculation does not take into account
the effects, if any, of provisions of the option plans governing
termination of options upon employment termination, transferability or
vesting.
Stock Option Exercises and Fiscal Year-End Values
The following table contains certain information concerning stock options
exercised during 1999 and the value of unexercised options at December 31,
1999.
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares December 31, 1999 December 31, 1999(1)
Acquired Value ------------------------- -------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
Roger L. Jarvis......... -- -- 840,906 387,623 $4,438,400 $1,109,600
James M. Alexander...... -- -- 336,620 156,078 1,775,360 443,840
William D. Hubbard...... -- -- 160,792 147,168 832,200 554,800
L. Scott Broussard...... -- -- 25,880 50,718 125,840 188,760
Kelly M. Barnes......... -- -- 79,679 95,514 374,490 249,660
- --------
(1) The value of each unexercised in-the-money stock option is equal to the
difference between the closing price of the Common Stock on The Nasdaq
Stock Market on December 31, 1999 of $14.13 per share and the exercise
price of the stock option.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors currently consists of
Messrs. Harris, Bruheim, Erikson, McMahon, Michaelsen and Newman. None of the
Company's executive officers serves as a member of the board of directors or
compensation committee of any entity that has one or more of its executive
officers serving as a member of the Board of Directors or Compensation
Committee.
8
Transactions with Related Parties
On December 20, 1996, the Company entered into a seismic data agreement
with PGS. The Company amended the agreement as of January 6, 1998 when it
converted from a limited liability company to a corporation. The Company
amended the agreement again as of June 30, 1999 to modify the amount, type and
geographic coverage of the data and related information made available to the
Company. In connection with that second amendment, the Company issued
1,000,000 shares of Common Stock to PGS. The Company has agreed to purchase
$2.0 million of seismic-related services from PGS prior to December 31, 2002.
The Company's purchases of seismic-related services from PGS were $318,000 in
1999. The Company believes the terms of the data agreement are at least as
fair to the Company as it could have obtained from an unaffiliated third
party.
Prior to the initial public offering, the executive officers, directors and
5% stockholders invested cash and other property in Spinnaker in exchange for
shares of preferred stock and Common Stock. Each share of preferred stock was
converted into two shares of Common Stock in connection with the initial
public offering. In addition, Warburg, PGS, Mr. Jarvis and Mr. Alexander
received 951,037, 241,995, 5,147 and 2,069 shares of Common Stock,
respectively, in lieu of receiving accrued cash dividends on the preferred
stock based on the initial public offering price less the underwriters'
discounts and commissions per share.
PGS and Warburg each received 38,048 shares of Common Stock in 1999 in
consideration for providing guarantees of the Company's credit facility. The
guarantees were terminated in connection with the initial public offering.
Compensation Committee Report on Executive Compensation
During 1999, the Compensation Committee of the Board of Directors consisted
of Messrs. Harris, Bruheim, McMahon, Michaelsen and Newman. The Compensation
Committee oversees the administration of compensation programs applicable to
all employees of the Company, including its executive officers. Executive
compensation is reviewed and approved annually by the Compensation Committee.
The Compensation Committee seeks to encourage growth in the Company's oil
and gas reserves and cash flow and to enhance stockholder value through the
creation and maintenance of compensation opportunities that attract and retain
committed, highly qualified personnel. To achieve those goals, the
Compensation Committee believes that the compensation of all employees,
including executive officers, should include the following components:
. A base salary that is competitive with compensation offered by other oil
and gas exploration and production enterprises similar to the Company.
. Annual incentive compensation, based on Company performance and
profitability, to reward achievement of Company objectives, individual
responsibility and productivity, high quality work and impact on Company
results.
. Case-specific compensation plans to accommodate individual circumstances
or non-recurring situations as required.
Section 162(m) of the Code generally disallows a tax deduction to a public
company for compensation paid to its chief executive officer and four other
most highly compensated executive officers if the compensation of any such
officers exceeds $1.0 million in a particular year. In connection with its
policies relating to executive compensation, the Compensation Committee
considered the implications of Section 162(m) along with the various other
factors described elsewhere in this report in making its executive
compensation determinations in 1999. The Compensation Committee has not
intended and does not currently intend to award compensation to any executive
officer that would exceed the deduction limit of Section 162(m).
9
Company Performance. The following summarizes the Company's operational and
financial highlights for the year ended December 31, 1999:
. In 1999, the Company drilled 12 exploratory wells with 8 of these wells
being completed as discoveries. From its inception through December 31,
1999, the Company participated in drilling 31 exploratory wells with 21
of these wells being completed as discoveries.
. The Company's proved reserves increased approximately 94% to 104.5
billion cubic feet of natural gas equivalent ("Bcfe") at December 31,
1999 compared to 53.8 Bcfe at December 31, 1998.
. The Company's net production increased over 600% to 13.0 Bcfe in 1999
compared to 1.7 Bcfe in 1998.
. Net loss was $1.3 million in 1999 compared to a net loss of $6.9 million
in 1998.
. Income from operations was $1.3 million in 1999 compared to a loss from
operations of $6.8 million in 1998.
. Cash flow from operations, before working capital changes, increased to
$21.7 million in 1999 from a $1.0 million net cash flow from operations
deficit, before working capital changes, in 1998.
. The Company completed its initial public offering on October 4, 1999 and
received net proceeds of $108.7 million. With a portion of the proceeds,
the Company retired all then outstanding debt of $72.0 million.
Executive Compensation. Before taking the actions described in this report,
the Compensation Committee thoroughly reviewed and discussed the Company's
financial and operating results. A summary of the indicators deemed
particularly relevant by the Compensation Committee are presented above.
Specific actions taken by the Compensation Committee regarding executive
compensation are summarized below.
Base salary. The Compensation Committee evaluated peer group information in
setting base salary levels. Annual salary adjustments for the Company's
executive group are based on general levels of market salary increases,
individual performance and the Company's overall financial and operating
results, without any specific relative weight assigned to any of these
factors.
Incentive Bonus. Awards granted to the named executive officers in February
2000 for the 1999 performance period are presented under "Bonus" in the
Summary Compensation Table. Such awards were based on level of responsibility,
the Company's performance and on individual productivity, quality of work and
impact on the Company's results. The Compensation Committee established awards
for each executive after reviewing the recommendations of the Chief Executive
Officer.
Stock Option Awards. In February 1999, the Compensation Committee granted
options to purchase 30,000 and 5,000 shares of Common Stock to Messrs. Barnes
and Broussard, respectively, to provide incentive with respect to the
Company's future performance. In October 1999, the Compensation Committee
granted options to purchase 95,898, 59,960, 33,593 and 18,798 shares of Common
Stock to Messrs. Alexander, Hubbard, Barnes and Broussard, respectively, to
provide incentive with respect to the Company's future performance.
Additionally, these awards have a meaningful retention component since 20%
vest on the grant date and on each succeeding anniversary of the grant date.
Chief Executive Officer Compensation. As described above, the Company's
executive compensation philosophy, including compensation of the Chief
Executive Officer, is a competitive base salary and incentive compensation
based upon the Company's performance. Specific actions taken by the
Compensation Committee regarding Mr. Jarvis' compensation are summarized
below.
Base Salary. Mr. Jarvis' salary was not adjusted during 1999. The
Compensation Committee increased Mr. Jarvis salary from $265,000 in 1999 to
$290,000 effective March 1, 2000. The Compensation Committee considered
operating and financial results for 1999 and the compensation received by
chief executive officers of comparable companies in the oil and gas
exploration and production industry.
10
Incentive Bonus. The Compensation Committee approved a bonus of $134,000 to
Mr. Jarvis for 1999, which was paid in February 2000. This award was based
upon the Company's performance and on his impact on the Company's results.
Stock Option Awards. In October 1999, the Compensation Committee granted
options to purchase 236,529 to Mr. Jarvis to provide incentive with respect to
the Company's future performance. This award vests 20% on the grant date and
on each succeeding anniversary of the grant date.
Compensation Committee
Jeffrey A. Harris
Bjarte Bruheim
Michael E. McMahon
Reidar Michaelsen
Howard H. Newman
11
Stockholder Return Performance Presentation
As required by applicable rules of the Commission, the performance graph
shown below was prepared based upon the following assumptions:
1. $100 was invested in the Company's Common Stock on September 29,
1999, and $100 was invested in the Peer Group (as defined below) and the
S&P 400 Oil/Gas--Exploration/Production on September 29, 1999 at the
closing price on such date.
2. Peer Group investment is weighted based on the stock market
capitalization of each individual company within the Peer Group at the
beginning of the period.
3. Dividends are reinvested on the ex-dividend dates.
The companies that comprise the Company's Peer Group are as follows: Basin
Exploration, Inc., Chieftain International, Inc., The Houston Exploration
Company, Newfield Exploration Company and Stone Energy Corporation.
[Graph Appears Here]
09/29/99 12/31/99
-------- --------
Spinnaker Exploration Company................................. $100 $97.41
Peer Group.................................................... $100 $81.71
S&P 400 Oil/Gas-Exp/Prod...................................... $100 $85.81
12
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Pursuant to the recommendation of the Audit Committee, the Board of
Directors appointed Arthur Andersen LLP, independent public accountants, to
audit the consolidated financial statements of the Company for the year ending
December 31, 2000.
Ratification of this appointment shall be effective upon receiving the
affirmative vote of the holders of a majority of the Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting. Accordingly,
an abstention or a broker non-vote would have the same effect as a vote
against this proposal.
The Board of Directors recommends that stockholders vote "FOR" ratification of
this appointment.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent public accountants. The Board of
Directors may terminate the appointment of Arthur Andersen LLP as the
Company's independent public accountants without the approval of the
stockholders of the Company whenever the Board of Directors deems such
termination necessary or appropriate. A representative of Arthur Andersen LLP
is expected to be present at the Annual Meeting, will be offered the
opportunity to make a statement if such representative desires to do so and
will be available to respond to appropriate questions.
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournments(s) thereof, it is
intended that the enclosed proxy will be voted in accordance with the judgment
of the persons voting the proxy.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Any stockholder who wishes to submit a proposal for inclusion in the proxy
material for the Company's 2001 Annual Meeting of Stockholders must forward
such proposal to the Secretary of the Company at the address indicated on the
cover page of this proxy statement, so that the Secretary receives it no later
than December 13, 2000. The deadline for receipt of a proposal for which a
stockholder will conduct his or her own solicitation or for receipt of a
director nomination by a stockholder is February 22, 2001. On request, the
Secretary of the Company will provide detailed instructions for submitting
proposals or nominations.
By Order of the Board of Directors
/s/ James M. Alexander
James M. Alexander
Secretary
April 13, 2000
13
SPINNAKER EXPLORATION COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS--MAY 23, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE SPINNAKER EXPLORATION COMPANY
BOARD OF DIRECTORS
The undersigned hereby appoints Roger L. Jarvis, James M. Alexander and Jeffrey
C. Zaruba, and each of them, proxies for the undersigned with full power of
substitution, to vote all shares of Spinnaker Exploration Company Common Stock
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of Spinnaker Exploration Company to be held in Houston, Texas, on
Tuesday, May 23, 2000 at 9:00 a.m., or at any adjournment thereof, upon the
matters set forth on the reverse side and described in the accompanying Proxy
Statement and upon such other business as may properly come before the meeting
or any adjournment thereof.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY ITEM. IF
YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS,
PLEASE SIGN THE REVERSE SIDE, NO BOXES NEED TO BE CHECKED.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
. FOLD AND DETACH HERE .
SPINNAKER EXPLORATION COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [x]
1. ELECTION OF DIRECTORS
1) Roger L. Jarvis, 2) Bjarte Bruheim, 3) Jeffrey A. Harris,
4) Reidar Michaelsen, 5) Howard H. Newman, For Withheld For All Nominee Exception(s)
6) Michael E. McMahon and 7) Sheldon R. Erikson All All Except
[ ] [ ] [ ] _____________________________
For Against Abstain
2. TO RATIFY SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS [ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2
NOTE: Please sign as name appears hereon.
Joint owners should each sign. When signing
as attorney, executor, administrator, trustee
or guardian, please give full title as such.
Signature: _____________________ Date: ____________
Signature: _____________________ Date: ____________
- ------------------------------------------------------------------------------------------------------------------------------------
. FOLD AND DETACH HERE .