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 Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
ABACAN RESOURCE CORPORATION
(Name of Registrant as Specified in its Charter)
_____________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
ABACAN RESOURCE CORPORATION
NOTICE OF ANNUAL GENERAL AND SPECIAL MEETING
OF THE COMMON SHAREHOLDERS OF
ABACAN RESOURCE CORPORATION
MONDAY, MARCH 29, 1999
J.W. MARRIOTT HOTEL
HOUSTON, TEXAS
TO THE SHAREHOLDERS:
TAKE NOTICE that the Annual General and Special Meeting (the
"Meeting") of the common shareholders of Abacan Resource Corporation (the
"Corporation") will be held at the J.W. Marriott Hotel, 5051 Westheimer,
Houston, Texas, 77056, at the hour of 10:00 o'clock a.m. (Houston time) on
Monday, March 29, 1999, for the following purposes:
1. To receive and consider the Report to the Shareholders of the Board of
Directors and the audited financial statements for the fiscal year ended
December 31, 1998 and the Report of the Auditors thereon.
2. To fix the Board of Directors of the Corporation at five (5) members and
to elect a Board of Directors of the Corporation for the ensuing year.
3. To consider, and if deemed appropriate, to authorize the board of
directors in its sole discretion, to amend the Articles of the Corporation
to give effect to a consolidation (reverse split) of the Corporation's
common shares in accordance with the Conversion Formula described in the
Management Information Circular accompanying this Notice of Annual and
Special Meeting.
4. To re-appoint Deloitte & Touche, L.L.P., as Auditors for the Corporation
for the ensuing year or until they are removed or resign from office.
5. To transact such other business as may be properly brought before the
Meeting or any adjournment thereof.
DATED at Houston, Texas this 1st day of March, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
("SIGNED")
TIMOTHY T. STEPHENS
PRESIDENT
IMPORTANT
Shareholders who are unable to attend the Meeting in person are requested to
date and sign the enclosed form of Instrument of Proxy and return it in the
envelope provided for that purpose to the Corporation's transfer agent not less
than 48 hours, excluding Saturdays, Sundays and statutory holidays, prior to the
time of the Meeting or any adjournment thereof. The Chairman of the Meeting may,
at his discretion, accept proxies at any time up to the commencement of the
Meeting.
Shareholders are cautioned that the use of the mail to transmit Instruments of
Proxy is at each shareholder's risk.
The Board of Directors of the Corporation has fixed the Record Date for the
Meeting at the close of business on February 5, 1999 (the "Record Date"). Only
shareholders of record at the close of business on the Record Date are entitled
to vote such common shares at the Meeting on the basis of one vote for each
common share held except to the extent that, (i) the holder transfers his or her
shares are the close of business on the Record Date, and (ii) such transferee
produces properly endorsed share certificates to the Secretary or Transfer Agent
of the Corporation or otherwise establishes his or her ownership of the shares,
at least 10 days prior to the Meeting, in which case the transferee may vote
those shares.
<PAGE>
ABACAN RESOURCE CORPORATION
EXECUTIVE OFFICE
3050 POST OAK BLVD, SUITE 699
HOUSTON, TEXAS
U.S.A. 77056
MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT
SOLICITATION OF PROXIES
THIS MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT (THE "MANAGEMENT
CIRCULAR") IS PROVIDED IN CONNECTION WITH THE SOLICITATION OF PROXIES BY THE
BOARD OF DIRECTORS AND THE MANAGEMENT OF ABACAN RESOURCE CORPORATION (THE
"CORPORATION") FOR THE ANNUAL GENERAL AND SPECIAL MEETING OF THE SHAREHOLDERS OF
THE CORPORATION (THE "MEETING") TO BE HELD ON MONDAY, MARCH 29, 1999 AT 10:00
A.M. (HOUSTON TIME) AT THE J.W. MARRIOTT HOTEL, 5051 WESTHEIMER, HOUSTON, OR AT
ANY ADJOURNMENT THEREOF FOR THE PURPOSES SET OUT IN THE ACCOMPANYING NOTICE OF
MEETING.
Although it is expected that the solicitation of proxies will be primarily by
mail, proxies may also be solicited personally or by telephone, telegraph or
personal interview by regular employees of the Corporation. Such persons will
not receive additional compensation from the Corporation for the solicitation of
such proxies. In accordance with Canadian National Policy No. 41, arrangements
have been made with brokerage houses and other intermediaries, clearing
agencies, custodians, nominees and fiduciaries to forward solicitation materials
to the beneficial owners of the common shares held of record by such persons and
the Corporation may reimburse such persons for reasonable fees and disbursements
incurred by them in doing so. THE COSTS THEREOF WILL BE BORNE BY THE
CORPORATION.
In this Management Circular all monetary references are to U.S. dollars unless
indicated otherwise. The date of this Management Circular is February 26, 1999.
The date on which this Management Circular is first being sent or given to
security holders is on or about March 5, 1999.
The Corporation's Annual Report to Shareholders for the year ended December 31,
1998 is being mailed to all shareholders entitled to vote at the Meeting. The
Annual Report does not constitute a part of this proxy solicitation material.
APPOINTMENT AND REVOCATION OF PROXIES
The persons named in the enclosed Instrument of Proxy ("Proxy") have been
selected by directors or officers of the Corporation and have indicated their
willingness to represent as proxy the shareholder who appoints them. A
SHAREHOLDER HAS THE RIGHT TO DESIGNATE A PERSON (WHO NEED NOT BE A SHAREHOLDER)
OTHER THAN TIMOTHY T. STEPHENS, PRESIDENT, OF HOUSTON, TEXAS AND EDWARD W.
TAPUSKA, SECRETARY, OF CALGARY, ALBERTA, BEING MANAGEMENT DESIGNEES, TO
REPRESENT HIM OR HER AT THE MEETING. Such right may be exercised by inserting in
the space provided for that purpose on the Proxy the name of the person to be
designated and deleting therefrom the names of the management designees, or by
completing another proper form of Proxy. Such shareholder should notify the
nominee of the appointment, obtain a consent to act as proxy and should provide
instructions on how the shareholder's shares are to be voted. In any case, the
form of Proxy should be dated and executed by the shareholder or an attorney
authorized in writing, with proof of such authorization attached where an
attorney executed the form of Proxy.
A form of Proxy will not be valid for the Meeting or any adjournment thereof
unless it is completed and delivered to Montreal Trust Company, 6th Floor, 530
8th Avenue S.W., Calgary, Alberta, Canada T2P 3S8, at least forty eight (48)
hours, excluding Saturdays and holidays, before the time of the Meeting
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or any adjournment thereof. The Chairman of the Meeting may, at his discretion,
accept proxies at any time up to the commencement of the Meeting.
In addition to revocation in any other manner permitted by law, a shareholder
who has given a proxy may revoke it, any time before it is exercised, by
instrument in writing executed by the shareholder or by his attorney authorized
in writing and deposited either at the registered office of the Corporation at
any time up to and including the last business day preceding the day of the
Meeting, or any adjournment thereof, at which the proxy is to be used, or with
the Chairman of the Meeting on the day of the Meeting or any adjournment
thereof. In addition, a proxy may be revoked by the registered shareholder
personally attending at the meeting and voting his shares.
ADVICE TO BENEFICIAL SHAREHOLDERS
Only shareholders of record at the close of business on the Record Date are
entitled to vote at the Meeting. Shareholders who do not hold their shares in
their own name (referred to herein as "Beneficial Shareholders") are advised
that only proxies from shareholders of record can be recognized and voted upon
at the Meeting. Beneficial Shareholders who complete and return a proxy must
indicate thereon the person (usually a brokerage house) who holds their common
shares as a registered shareholder. Every intermediary (broker) has its own
mailing procedure, and provides its own return instructions, which should be
carefully followed. The form of Proxy supplied to Beneficial Shareholders is
substantially the same as that provided to registered shareholders. However, its
purpose is limited to instructing the registered shareholder how to vote on
behalf of the Beneficial Shareholder.
All references to shareholders in this Management Circular and the accompanying
form of Proxy and Notice of Meeting are to shareholders of record unless
specifically stated otherwise.
VOTING OF PROXIES
All common shares represented at the Meeting by properly executed Proxies will
be voted (including the voting on any ballot), in the manner specified on the
Proxy. Where a choice with respect to any matter to be acted upon has been
specified in the Proxy, the common shares represented by the Proxy will be voted
in accordance with such specification. IN THE ABSENCE OF ANY SUCH SPECIFICATION,
THE MANAGEMENT DESIGNEES, IF NAMED AS PROXY, WILL VOTE IN FAVOUR OF THE MATTERS
SET OUT THEREIN.
THE ENCLOSED FORM OF PROXY CONFERS DISCRETIONARY AUTHORITY UPON THE MANAGEMENT
DESIGNEES, OR OTHER PERSONS NAMED AS PROXY, WITH RESPECT TO AMENDMENTS TO OR
VARIATIONS OF MATTERS IDENTIFIED IN THE NOTICE OF MEETING AND ANY OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING. AS OF THE DATE HEREOF, THE
CORPORATION IS NOT AWARE OF ANY AMENDMENTS TO, VARIATIONS OF OR OTHER MATTERS
WHICH MAY COME BEFORE THE MEETING. IN THE EVENT THAT OTHER MATTERS COME BEFORE
THE MEETING, THEN THE MANAGEMENT DESIGNEES INTEND TO VOTE IN ACCORDANCE WITH THE
JUDGMENT OF THE MANAGEMENT OF THE CORPORATION.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
OUTSTANDING SHARE CAPITAL AND QUOROM REQUIREMENTS
The Corporation has an authorized capital consisting of an unlimited number of
common shares, without nominal or par value, of which 114,370,836 are issued and
outstanding as at February 5, 1999 (the
"Record Date") .
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Holders of common shares of record at the close of business on the Record Date
are entitled to vote such common shares at the Meeting on the basis of one vote
for each common share held except to the extent that, (i) the holder transfers
his or her common shares after the close of business on the Record Date, and
(ii) such transferee produces properly endorsed share certificates to the
Secretary or Transfer Agent of the Corporation or otherwise establishes his or
her ownership of the common shares, at least 10 days prior to the Meeting, in
which case the transferee may vote those common shares.
The presence of two persons holding at least five percent (5%) of the issued and
outstanding common shares of the Corporation entitled to vote at the Meeting,
either in person or represented by properly executed proxies, is necessary to
constitute a quorum for the transaction of business at the Meeting. If there are
not sufficient common shares represented in person or by proxy at the Meeting to
constitute a quorum, the Meeting may be postponed or adjourned in order to
permit further solicitation of proxies by the Corporation. Abstentions are
counted as "shares present" at the Meeting for purposes of determining the
presence of a quorum while broker non-votes (which result when a broker holding
shares for a Beneficial Shareholder has not received timely voting instructions
on certain matters from such Beneficial Shareholder) are not considered "shares
present" at the meeting with respect to any matter.
To the knowledge of the Corporation, the following table sets forth information
as of the Record Date with respect to beneficial ownership of the Corporation's
common shares by (i) each director, (ii) each executive officer, (iii) all
executive officers and directors as a group, and (iv) each person known to the
Corporation to beneficially own 5% or more of its outstanding common shares.
Except as otherwise indicated below, the address of all such persons is c/o
Abacan Resource Corporation, 3050 Post Oak Blvd, Suite 699 Houston, Texas,
U.S.A., 77056. Unless otherwise indicated, each of the shareholders has sole
voting and investment power with respect to the shares beneficially owned.
NUMBER OF PERCENTAGE
SHARES OF SHARES
NAME AND ADDRESS OF BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED(1) OWNED(2)
------------ ------------
Directors and Executive Officers as a group(3) 12,829,104 9.93%
Timothy T. Stephens ........................... 1,867,666(5) 1.46%
James S. Harvie ............................... 1,725,500(6) 1.35%
Daryl K. ("Doc") Seaman(14) ................... 590,000(7) 0.46%
Wade G. Cherwayko(14) ......................... 6,470,938(8) 5.06%
Said S. Arrata(14) ............................ 500,000(9) 0.39%
T.B. ("Tunde") Folawiyo ....................... 1,675,000(10) 1.31%
Baudoin de La Grandville(4) ................... 150,000(11) 0.12%
Tom Horricks(4) ............................... 162,500(12) 0.13%
State Street Research & Management Company .... 10,019,200(13) 7.84%
One Financial Centre, 30th Floor .............. 11,414,700(15) 8.93%
Boston, MA 02111-2690
Mutual Management Corp. ....................... 10,916,000 8.54%
388 Greenwich Street
New York, New York 10013
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NUMBER OF PERCENTAGE
SHARES OF SHARES
NAME AND ADDRESS OF BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER OWNED(1) OWNED(2)
------------ ------------
Travelers Group Inc. ............................ 15,356,817 12.01%
388 Greenwich Street
New York, New York 10013
Notes:
(1) Includes common shares and stock options currently exercisable or
exercisable within 60 days of the Record Date. All information is as of
the Record Date and was determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, based upon information
furnished by the persons listed or contained in the most recent filings
made by them with the Securities and Exchange Commission or otherwise
known to the Corporation. Unless otherwise indicated, beneficial ownership
disclosed consists of sole voting and dispositive power. Stock options
currently exercisable, or exercisable within sixty days into common shares
of the Corporation, are deemed outstanding for computing the percentage of
ownership of the person holding the stock options, but are not deemed
outstanding for computing the percentage of ownership of any other person.
The exercise price of all options granted to the holders thereof are in
Canadian dollars. Such exercise price has, for the purposes of this table
and the notes thereto, been converted into U.S. dollars utilizing a
conversion rate of Cdn. $1.52 per U.S. $1.00.
(2) These percentages are based on 127,778,940 common shares outstanding which
number has been calculated by adding all of the options exercisable by the
Named Executive Officers to the Corporation's current issued and
outstanding common shares.
(3) Includes all of the Corporation's directors and executive officers as a
group and includes the securities described in footnotes 5 through 12
inclusive. Following the Record Date, Mr. James Kishpaugh and Mr. Kenneth
Rutherford were appointed to the Board of Directors. Neither Mr.
Rutherford of Kishpaugh hold shares in the Company.
(4) Individuals with total salary and bonuses during the most recently
completed financial year exceed $100,000.
(5) Includes an option to purchase 666,666 common shares at an exercise price
of $2.14 per common share expiring February 10, 2003; an option to
purchase 750,000 common shares at an exercise price of $0.39 per common
share expiring June 2, 2003; an option to purchase 425,000 common shares
at an exercise price of $0.18 per common share expiring October 23, 1998;
and an option to purchase 25,000 common shares at an exercise price of
$0.23 per common share expiring October 23, 2003. Does not include options
to acquire 333,334 common shares that are not currently exercisable.
(6) Includes an option to purchase 500,000 common shares at an exercise price
of $2.56 per common share expiring July 8, 2002; an option to purchase
500,000 common shares at an exercise price of $0.39 per common share
expiring June 2, 2003; an option to purchase 587,500 common shares at an
exercise price of $0.18 per common share expiring October 23, 2003; and an
option to purchase 37,500 common shares at an exercise price of $0.23 per
common share expiring October 23, 2003.
(7) Includes an option to purchase 215,000 common shares at an exercise price
of $2.40 per common share expiring January 26, 2001; an option to purchase
100,000 common shares at an exercise price of $7.99 per common share
expiring February 1, 2002; an option to purchase 100,000 common shares at
an exercise price of $2.56 per common share expiring July 8, 2002; an
option to purchase 100,000 common shares at an exercise price of $0.39 per
common share expiring June 2, 1998; and an option to purchase 75,000
common shares at an exercise price of $0.18 per common share expiring
October 23, 2003.
(8) Includes an option to purchase 207,700 common shares at an exercise price
of $1.77 per common share expiring March 1, 2000; an option to purchase
975,000 common shares at an exercise price of $2.40 per common share
expiring January 26, 2001; an option to purchase 625,000 common shares at
an exercise price of $2.56 per common share expiring July 8, 2002; an
option to purchase 200,000 common shares at an exercise price of $0.39 per
common share expiring June 2, 2003; an option to purchase 500,000 common
shares at an exercise price of $0.18 per common share expiring October 23,
2003; and an option to purchase 25,000 common shares at an exercise price
of $0.23 per common share expiring October 23, 2003.
(9) Includes an option to purchase 175,000 common shares at an exercise price
of $1.77 per common share expiring March 1, 2000; an option to purchase
125,000 common shares at an exercise price of $2.40 per common share
expiring January 26, 2001; an option to purchase 75,000 common shares at
an exercise price of $7.99 per common share expiring February 1, 2002; an
option to purchase 25,000 common shares at an exercise price of $2.56 per
common expiring July 8, 2002; and an option to purchase 100,000 common
shares at an exercise price of $0.18 per common share expiring October 23,
2003.
(10) Includes an option to purchase 50,000 common shares at an exercise price
of $1.77 per common share expiring March 1, 2000; an option to purchase
600,000 common shares at an exercise price of $2.40 per common share
expiring January 26, 2001; an option to purchase 350,000 common shares at
an exercise price of $2.56 per common share expiring July 8, 2002; an
option to purchase 200,000 common shares at an exercise price of $0.39 per
common share expiring June 2, 2003; an option to purchase 450,000 common
shares at an exercise price of $0.18 per common share expiring October 23,
2003; and an option to purchase 25,000 common shares at an exercise price
of $0.23 per common share expiring October 23, 2003.
(11) Includes an option to purchase 25,000 common shares at an exercise price
of $2.56 per common share expiring July 8, 2002; an option to purchase
50,000 common shares at an exercise price of $0.39 per common share
expiring June 2, 2003, and an option to purchase 75,000 common shares at
an exercise price of $0.18 per common share which expires on October 23,
2003.
(12) Includes an option to purchase 105,000 common shares at an exercise price
of $3.52 per common share expiring July 23, 2001; an option to purchase
12,500 common shares at an exercise price of $2.56 per common share
expiring July 8, 2002; an option to purchase 20,000 common shares at an
exercise price of $0.39 per common share expiring June 2, 2003; and an
option to purchase 25,000 common shares at an exercise price of $0.18 per
common share expiring October 23, 2003.
(13) Reflects shares held in which the beneficial holder has sole voting power.
(14) Resigned as a director of the Corporation effective February 8, 1999.
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(15) Reflects shares held in which the beneficial holder has sole dispositive
power.
GENERAL INFORMATION WITH RESPECT TO THE BOARD OF DIRECTORS
GENERAL
At December 31, 1998, the Corporation had six directors. On February 8, 1999,
Wade G. Cherwayko, Said Arrata and Daryl Seaman resigned as directors and James
Kishpaugh and Kenneth Rutherford were appointed as directors.
MEETINGS
For the year ended December 31, 1998, the Board of Directors held 3 formal
meetings and acted 9 times by unanimous consent. There are three standing
committees of the Board of Directors, the Audit Committee, the Compensation
Committee and the Corporate Governance Committee. The Corporation does not have
a standing Nomination Committee.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE. On the Record Date, the Audit Committee consisted of James
Harvie, Said Arrata and Daryl Seaman. Messrs. Arrata and Seaman resigned from
the Board of Directors and Audit Committee on February 8, 1999. Mr. Kishpaugh
and Mr. Rutherford were appointed to the Audit Committee on February 18, 1999.
The general function of the Audit Committee is to oversee the Corporation's
financial reporting process and to periodically report to the Board of Directors
in respect thereof. In discharging its responsibilities, the Audit Committee has
adopted a number of practices intended to ensure accurate and timely financial
reporting and to preserve the independence of the external auditor. These
practices include (1) the review of management's recommendation for external
auditors; (2) the review of the terms of engagement of the auditor; (3) the
review of the audit plan with the auditor and management; and (4) the
questioning of management and the external auditor regarding any significant
financial reporting issues or changes in reporting policies or procedures.
During 1998, the Audit Committee held two meetings.
COMPENSATION COMMITTEE. On the Record Date, the Compensation Committee consisted
of James Harvie, Said Arrata and Daryl Seaman. Messrs. Arrata and Seaman
resigned from the Board of Directors and Compensation Committee on February 8,
1999. Mr. Kishpaugh and Mr. Rutherford were appointed to the Audit Committee on
February 18, 1999. The principal function of the Compensation Committee is to
periodically determine the amount and form of compensation and benefits to be
paid to the Corporation's executive officers and principal management personnel.
See "Report of Compensation Committee on Executive Compensation." During 1998,
the Compensation Committee held two formal meetings and met periodically
throughout the year as circumstances required.
CORPORATE GOVERNANCE COMMITTEE. On the Record Date, the Corporate Governance
Committee consisted of James Harvie, Said Arrata and Daryl Seaman. Messrs.
Arrata and Seaman resigned from the Board of Directors and Corporate Governance
Committee on February 8, 1999. Mr. Kishpaugh and Mr. Rutherford were appointed
to the Corporate Governance Committee on February 18, 1999. The principal
function of the Corporate Governance Committee is review the Corporation's
existing corporate governance procedures, make recommendations to the Board as a
whole on how to better achieve effective corporate governance and to report
annually to the shareholders of the Corporation on those areas where the
Corporation does not comply with the corporate governance guidelines established
by The Toronto Stock Exchange.
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COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
During the fiscal year ended December 31, 1998, the Corporation paid no cash
compensation (including salaries, director's fees, commissions, bonuses paid for
services rendered, bonuses paid for services rendered in a previous year, and
any compensation other than bonuses earned by the directors for services
rendered) to the directors for services rendered as such. Compensation has been
paid by the Corporation to certain directors or companies owned or controlled by
directors where such directors have provided ongoing professional consulting or
employment services to the Corporation or its subsidiaries. Executive officers
of the Corporation who also act as directors of the Corporation, do not receive
any additional compensation for services rendered in their capacity as
directors, other than as paid by the Corporation to such executive officers in
their capacity as executive officers. See " -- Compensation of Executive
Officers".
During the fiscal year ended December 31, 1998, a total of 4,999,500 stock
options were granted to the directors of the Corporation (including directors
who were executive officers). See " -- Stock Options".
COMPENSATION OF EXECUTIVE OFFICERS
During the fiscal year ended December 31, 1998, the Corporation had three
executive officers, two of whom continued to hold such positions with the
Corporation at its most recently completed year end. The two executive officers
at year end were Mr. Timothy Stephens, President and Chief Executive Officer and
Mr. James Harvie, Vice-Chairman and Chief Operating Officer. On February 10,
1998, Mr. Timothy T. Stephens assumed the position of President and Chief
Executive Officer of the Corporation from Mr. Wade Cherwayko who continues to be
a consultant to and an officer and director of several of the Corporation's
foreign subsidiaries. The aggregate cash compensation (including salaries,
director's fees, commissions, consulting fees, bonuses paid for services
rendered bonuses paid for services rendered in a previous year, and any
compensation other than bonuses earned) paid to the three executive officers and
corporations controlled by them by the Corporation and its subsidiaries for
services rendered, during the fiscal period ended December 31, 1998, totalled
approximately $199,500 to Mr. Stephens, approximately $150,000 to Mr. Harvie,
and approximately $197,500 to Mr. Cherwayko. A company wholly owned by Mr.
Cherwayko also became entitled to receive production royalty payments of
approximately $1,082,000 during the fiscal year ended December 31, 1998 from
Liberty Technical Services Ltd., ("Liberty") a wholly owned subsidiary of the
Corporation. Liberty has not yet paid the production royalty.
1. SUMMARY COMPENSATION
The following table sets forth a summary of the annual and long term
compensation for services paid during the Corporation's fiscal period ended
December 31, 1998 and the last three fiscal periods prior thereto to the
Corporation's Chief Executive Officer and other executive officers (the "Named
Executive Officers") whose compensation exceeded $100,000 during the fiscal year
ended December 31, 1998.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------------------- ----------------------------------
ALL OTHER
COMPENSATION
OTHER ANNUAL SECURITIES (INCLUDING
FISCAL COMPENSATION UNDER OPTIONS INSURANCE
PERIOD (INCLUDING (INCLUDING PREMIUMS AND
NAME AND PRINCIPAL ENDING TOTAL INTEREST AND WARRANTS AND SURRENDER
POSITION (D/M/Y) SALARY BONUS DIVIDENDS) RIGHTS) GRANTED VALUES)
- ---------------------------------------------- -------- --------- ----- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Timothy Stephens ............................. 31/12/98 $ 199,553(2) NIL NIL 2,200,000(3) NIL
Chief Executive .............................. 31/12/97 NIL NIL NIL NIL NIL
Officer(1) ................................... 31/12/96 NIL NIL NIL NIL NIL
James S. Harvie .............................. 31/12/98 $ 150,000 NIL NIL 1,125,000(5) NIL
Vice Chairman and ............................ 31/12/97 $ 100,000 NIL NIL 500,000(6) NIL
Chief Operating .............................. 31/12/96 NIL NIL NIL NIL NIL
Officer(4)
Wade G. Cherwayko, ........................... 31/12/98 $ 197,498 NIL NIL(8) 725,000(10) NIL
Director(7) .................................. 31/12/97 $ 124,999(1) NIL NIL 1,250,000(11) NIL
31/12/96 NIL NIL $ 66,250(9) 975,000(12) NIL
T.B. (Tunde) Folawiyo ........................ 31/12/98 $ 189,999 NIL NIL 675,000(14) NIL
Director(13) ................................. 31/12/97 $ 100,000 NIL NIL 700,000(15) NIL
31/12/96 NIL NIL NIL 600,000(16) NIL
Baudoin La Grandville ........................ 31/12/98 177,600 NIL NIL 125,000(17) NIL
31/12/97 88,000 NIL NIL 50,000(18) NIL
31/12/96 NIL NIL NIL NIL NIL
Tom Horricks ................................. 31/12/98 129,999 NIL NIL 45,000(19) NIL
31/12/97 129,999 NIL NIL 25,000(20) NIL
31/12/96 43,333 NIL NIL 155,000(21) NIL
</TABLE>
Notes:
(1) Mr. Stephens assumed the position of President, CEO and director on
February 10, 1998.
(2) Reflects salary from February 10 to December 31, 1998.
(3) Represents stock options exercisable into 1,000,000 common shares at $2.14
per common share; stock options exercisable into 750,000 common shares at
$0.39 per common share; stock options exercisable into 425,000 common
shares at $0.18 per common share and stock options exercisable into 25,000
common shares at $0.23 per common share.
(4) Mr. Harvie became a director and assumed the position of Vice President
and Chief Operating Officer on June 20, 1997.
(5) Represents stock options exercisable into 500,000 common shares at $0.39
per common share; stock options exercisable into 587,500 common shares at
$0.18 per common share and stock options exercisable into 37,500 common
shares at $0.23 per common share.
(6) Represents stock options exercisable into 500,000 Common Shares at $2.56
per common share.
(7) Mr. Cherwayko was President and CEO to February 10, 1998 and continued to
be a director at the most recently completed year end Mr. Cherwayko
resigned as a director on February 8, 1999. Mr Cherwayko continues to
provide ongoing consulting services to the Corporation and its
subsidiaries.
(8) A company wholly-owned by Mr. Cherwayko received or is entitled to
received from Liberty, a subsidiary of the Corporation, a gross overriding
production royalty of approximately $1,082,000 at the fiscal year ended
December 31, 1998. Liberty has not yet paid the production royalty.
(9) The amounts shown were paid by wholly-owned subsidiaries of the
Corporation to a private company wholly-owned by Mr. Cherwayko, in
connection with consulting services provided to such subsidiaries for
overseeing their foreign oil and gas operations.
(10) Represents stock options exercisable into 200,000 common shares at $0.39
per common share; stock options exercisable into 500,000 common shares at
$0.18 per common share and stock options exercisable into 25,000 common
shares at $0.23 per common share.
(11) Represents stock options exercisable into 1,250,000 common shares at $2.56
per common share.
(12) Represents stock options exercisable into 975,000 common shares at $2.40
per common share.
(13) Mr. Folawiyo provides ongoing consulting services to the Corporation and
its subsidiaries.
(14) Represents stock options exercisable into 200,000 common shares at $0.39
per common share; stock options exercisable into 450,000 common shares at
$0.18 per common share and stock options exercisable into 25,000 common
shares at $0.23 per common share.
(15) Represents stock options exercisable into 700,000 common shares at $2.56
per common share.
(16) Represents stock options exercisable into 600,000 common shares at $2.40
per common share.
(17) Represents stock options exercisable into 50,000 common shares at $0.39
per common share and stock options exercisable into 75,000 common shares
at $0.18 per common share.
(18) Represents stock options exercisable into 50,000 common shares at $2.56
per common share.
(19) Represents stock options exercisable into 25,000 common shares at $0.18
per common share and stock options exercisable into 20,000 common shares
at $0.39 per common share.
(20) Represents stock option exercisable into 25,000 common shares at $2.56
per common share.
(21) Represents stock options exercisable into 155,000 common shares at $3.52
per common share.
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ABACAN RESOURCE CORPORATION MANAGEMENT INFORMATION CIRCULAR
<PAGE>
- 8 -
2. STOCK OPTIONS
The Named Executive Officers of the Corporation were granted 4,895,000 stock
options during the fiscal year ended December 31, 1998. The following table sets
forth the stock options granted during the most recently completed financial
year to the Named Executive Officers of the Corporation.
OPTIONS GRANTED DURING THE FINANCIAL YEAR ENDED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
% OF TOTAL MARKET VALUE OF
OPTIONS SECURITIES
SECURITIES GRANTED TO UNDERLYING
UNDER EMPLOYEES EXERCISE OPTIONS/SAR'S ON
OPTIONS/SAR'S IN FISCAL PRICE(1) DATE OF GRANT(1)
NAME GRANTED (#) YEAR ($/SECURITY) ($/SECURITY) EXPIRATION DATE
- ------------------------------------------------ ------------- ---------- ------------ ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Timothy Stephens ............................... 1,000,000 $2.14/share $2.14/share February 10, 2003
750,000 $0.39/share $0.39/share June 2, 2003
425,000 $0.18/share $0.18/share October 23, 2003
25,000 $0.23/share $0.23/share October 23, 2003
-------------
2,200,000 38.53%
James Harvie ................................... 500,000 $0.39/share $0.39/share June 2, 2003
587,500 $0.18/share $0.18/share October 23, 2003
37,500 $0.23/share $0.23/share October 23, 2003
-------------
1,125,000 19.70%
Wade Cherwayko ................................. 200,000 $0.39/share $0.39/share June 2, 2003
500,000 $0.18/share $0.18/share October 23, 2003
25,000 $0.23/share $0.23/share October 23, 2003
-------------
725,000 12.70%
Tunde Folawiyo ................................. 200,000 $0.39/share $0.39/share June 2, 2003
450,000 $0.18/share $0.18/share October 23, 2003
25,000 $0.23/share $0.23/share October 23, 2003
-------------
675,000 11.82%
Baudoin La Grandville .......................... 50,000 $0.39/share $0.39/share June 2, 2003
75,000 $0.18/share $0.18/share October 23, 2003
-------------
125,000 2.19%
Tom Horricks ................................... 20,000 $0.39/share $0.39/share June 2, 2003
25,000 $0.18/share $0.18/share October 23, 2003
-------------
45,000 0.79%
</TABLE>
Notes:
(1) The exercise price of all options granted to the holders thereof are in
Canadian dollars. Such exercise price has for the purposes hereof, been
converted into U.S. dollars utilizing a conversion rate of Cdn.
$1.52 per U.S. $1.00.
The following table sets forth information in respect of all stock options which
were either exercised or not exercised by the Named Executive Officers of the
Corporation during the Corporation's fiscal period ended December 31, 1998.
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<PAGE>
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AGGREGATED OPTIONS EXERCISED DURING THE FISCAL PERIOD ENDED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
AGGREGATE VALUE OF
UNEXERCISED "IN-THE
SECURITIES UNEXERCISED OPTIONS AS AT MONEY" OPTIONS
ACQUIRED ON AGGREGATE DOLLAR DECEMBER 31, 1998 EXERCISABLE/
NAME AND TITLE EXERCISE VALUE REALIZED(1) EXERCISABLE/UNEXERCISABLE UNEXERCISABLE(2)
- ------------------------------------------------ ----------- ----------------- ------------------------- -------------------
<S> <C> <C> <C> <C>
Timothy Stephens ............................... NIL NIL 1,533,333 Exercisable $61,750 Exercisable
Chief Executive Officer ........................ -- -- 666,667 Unexercisable $Nil Unexercisable
James S. Harvie ................................ NIL NIL 1,375,000 Exercisable $85,555 Exercisable
Vice Chairman and Chief ........................ -- -- 250,000 Unexercisable $Nil Unexercisable
Operating Officer
Wade G. Cherwayko, ............................. NIL NIL 2,532,700 Exercisable $72,250 Exercisable
Director ....................................... -- -- 625,000 Unexercisable $Nil Unexercisable
Tunde Folawiyo ................................. NIL NIL 1,675,000 Exercisable $65,250 Exercisable
Director ....................................... -- -- 350,000 Unexercisable $Nil Unexercisable
Baudoin de La Grandville ....................... NIL NIL 150,000 Exercisable $10,500 Exercisable
-- -- 25,000 Unexercisable $Nil Unexercisable
-- -- 162,500 Exercisable $3,500 Exercisable
Tom Horricks ................................... NIL NIL 62,500 Unexercisable $Nil Unexercisable
</TABLE>
Notes:
(1) Being the aggregate of the difference between the market value realized on
sale of the securities and the exercise price.
(2) Unexercised "in-the-money" options refer to those options in respect of
which the market value of the underlying security as at the
financial year end exceeds the exercise or base price of the option.
The disclosure in this table shows the aggregate amount of the
difference between the market value of the securities on The Toronto
Stock Exchange as at December 31, 1998, being Cdn. $0.32 per
common share, and the exercise price.
3. LONG-TERM INCENTIVE PLANS
The Corporation currently has no long term incentive plans, other than stock
options granted from time to time by the Board of Directors under the provisions
of the Corporation's incentive stock option plan.
4. STOCK APPRECIATION RIGHTS AND RESTRICTED SHARES
No stock appreciation rights or restricted shares were granted by the
Corporation to the Named Executive Officers of the Corporation during the fiscal
period ended December
31, 1998.
5. STOCK OPTION AND SAR REPRICING
During the most recently completed financial year, Mr. Wade Cherwayko agreed to
voluntarily cancel options to acquire 1,522,300 common shares at $7.17 per
common share and options to acquire 500,000 common shares at $7.99 per common
share for a total of 2,022,300 common shares. Mr. Folawiyo also agreed to
voluntarily cancel options to acquire 300,000 common shares at $7.99 per common
share and options to acquire 500,000 common shares at $7.17 per common share for
a total of 800,000 common shares. In each case, the cancellation was made
following a request by the Corporation to cancel options in order to facilitate
the granting of options to new and existing directors, executive officers,
consultants and employees. During the most recently completed financial year,
Mr. Cherwayko and Mr. Folawiyo were granted options to acquire 725,000 and
675,000 common shares respectively. See "Stock Options". The grants to Messrs.
Cherwayko and Folawiyo were included as part of a general grant of stock options
to directors, executive officers, consultants and employees. Under the policies
of The Toronto Stock Exchange, the cancellation and re-grant of options to
acquire common shares constitutes a repricing of stock options. Such repricing
is subject to shareholder ratification pursuant to the policies of the TSE. The
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<PAGE>
- 10 -
following table sets forth details of all downward repricing of options held by
executive officers of the Corporation during the most recently completed
financial year.
<TABLE>
<CAPTION>
LENGTH OF
MARKET PRICE ORIGINAL OPTION
SECURITIES UNDER OF SECURITIES AT EXERCISE PRICE TERM
OPTIONS/SARS TIME OF AT TIME OF REMAINING AT
REPRICED OR REPRICING OR REPRICING OR NEW EXERCISE DATE OF
AMENDED AMENDMENT AMENDMENT PRICE REPRICING OR
NAME DATE OF REPRICING (#) ($/SECURITY)(1) ($/SECURITY) ($/SECURITY) AMENDMENT
- ----------------- -------------------- ---------------- ---------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Wade G .......... June 2, 1998(2) 200,000 $ 0.39 $ 7.17(3) $ 0.39 42 months
Cherwayko ....... October 23, 1998(2) 500,000 $ 0.18 $ 7.17(3) $ 0.18 38 months
Dec. 15, 1998(2) 25,000 $ 0.23 $ 7.17(3) $ 0.23 36 months
Tunde ........... June 2, 1998(2) 200,000 $ 0.39 $ 7.99(3) $ 0.39 44 months
Folawiyo ........ October 23, 1998(2) 450,000 $ 0.18 $ 7.17(3) $ 0.18 38 months
December 15, 1998(2) 25,000 $ 0.23 $ 7.17(3) $ 0.23 36 months
</TABLE>
Notes:
(1) Reflects the closing price of the Corporation's common shares on the TSE
(converted into U.S. currency) on the trading date immediately proceeding
the date of the grant.
(2) Reflects date new stock options were granted.
(3) Reflects exercise price of options canceled in chronological order.
6. PENSION AND RETIREMENT PLANS AND PAYMENTS MADE UPON TERMINATION OF
EMPLOYMENT
The Corporation does not have any pension or retirement plan which is applicable
to the Named Executive Officers. The Corporation has not provided compensation,
monetary or otherwise, during the preceding fiscal year, to any person who now
acts or has previously acted as a Named Executive Officer of the Corporation, in
connection with or related to the retirement, termination or resignation of such
person and the Corporation has provided no compensation to such persons as a
result of a change of control of the Corporation, its subsidiaries or
affiliates. Other than as set out under the heading "Employment and Management
Contracts", the Corporation is not currently party to any compensation plan or
arrangement with a Named Executive Officer resulting from the resignation,
retirement or the termination of employment of such person.
7. EMPLOYMENT AND MANAGEMENT CONTRACTS
At the completion of the most recently completed financial year, the Corporation
or its subsidiaries had an employment contract with Timothy Stephens, President
and CEO of the Corporation and consulting arrangements with each of its other
Named Executive Officers or companies owned or controlled by each of its other
Named Executive Officers.
On February 10, 1998, Mr. Timothy T. Stephens assumed the position of President
and Chief Executive Officer of the Corporation. Pursuant to an Employment
Services Agreement (the "Agreement") dated February 10, 1998, Mr. Stephens is
entitled to receive annual compensation of $225,000 payable monthly. The
duration of the agreement is three years. In the event of early termination
(except in the case of termination for cause) or non-renewal of the Agreement,
Mr. Stephens is entitled to a termination/departure payment equivalent to one
year's compensation. Mr. Stephens is entitled to incentive stock options at the
discretion of the Board of Directors.
Mr. James Harvie, Vice-Chairman and Chief Operating Officer is
currently entitled to annual compensation
of $140,000 payable monthly. Effective October 1, 1998, Mr. Harvie
accepted a reduction in
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ABACAN RESOURCE CORPORATION MANAGEMENT INFORMATION CIRCULAR
<PAGE>
- 11 -
compensation from $200,000 per annum to $140,000 per annum following a request
by the Corporation's management to reduce overall levels of executive
compensation. Mr. Harvie is entitled to receipt of incentive stock options at
the discretion of the Board of Directors.
Mr. Cherwayko, through a wholly owned private company currently provides
full-time consulting services to a number of the Corporation's subsidiaries.
Prior to resigning as President and CEO in February 1998, Mr. Cherwayko received
annual compensation of $250,000, after which his annual compensation was reduced
to $225,000. Effective October 1, 1998, Mr. Cherwayko has been paid $13,333 per
month ($160,000 per annum) following a request by the Corporation's management
to reduce the levels of executive compensation. Mr. Cherwayko is entitled to
receipt of incentive stock options at the discretion of the Board of Directors.
Mr. Folawiyo currently provides part-time consulting services to a number of the
Corporation's subsidiaries and is entitled to annual compensation of $160,500,
payable monthly. Effective October 1, 1998, Mr. Folawiyo accepted a reduction in
annual compensation from $200,000 to $160,500 following a request from the
Corporation's management to reduce the level of executive compensation. Mr.
Folawiyo is entitled to receipt of incentive stock options at the discretion of
the Board of Directors.
Mr. de La Grandville is a full-time consultant to one of the Corporation's
subsidiaries and is entitled to annual compensation of $120,000 payable monthly
and to receipt of incentive stock options at the discretion of the Board of
Directors.
Mr. Horricks is a full-time consultant to the Corporation and its subsidiaries
and is entitled to annual compensation of $130,000 and to receipt of incentive
stock options at the discretion of the Board of Directors.
PLANS AND SHARE OPTIONS
The Corporation currently has in effect an Incentive Stock Option Plan (the
"Plan") for directors, officers, employees and consultants of the Corporation
and its subsidiaries. The Plan provides that the aggregate number of common
shares which may be reserved for issuance under the Plan shall not exceed
18,750,000 common shares, that the number of common shares that can be reserved
for insiders (directors, officers and persons holding 10% of the Corporation's
issued and outstanding common shares) may not exceed 10% of the outstanding
issue and that the aggregate number of common shares which may be reserved for
issuance to any one individual shall not exceed 5% of the outstanding issue,
subject to adjustment for subdivisions, consolidation (reverse split) or
reclassification of the common shares, arrangements or mergers, the payment of
stock dividends or other relevant changes in the capital of the Corporation. The
Corporation currently has 14,262,200 common shares reserved for issuance and
12,356,200 common shares outstanding under the Plan.
The Plan provides that the Board of Directors shall administer the Plan unless a
special committee of directors is appointed. No such committee has been
appointed to date; however, the Compensation Committee is responsible for making
recommendations to the Board with respect to the awarding of stock options. To
date, the Board of Directors has followed the recommendations of the
Compensation Committee.
The exercise price of the common shares covered by the issued stock options is
determined by the directors but cannot be less than the greater of the "market
price" as defined by the Plan, at the time of grant and the price permitted by
The Toronto Stock Exchange.
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<PAGE>
- 12 -
The exercise period of options shall be a period of time fixed by the Board of
Directors, not to exceed the maximum period permitted by the TSE. If a holder
shall cease to be a director, officer, employee or consultant for any reason
other than death, the options granted to such holder will expire if not
exercised within 90 days following such cessation unless the options are granted
to a consultant in connection with specific services provided or to be provided
by that consultant, in which case the options may be exercised only after the
date of completion of such services and prior to 30 days following the date of
completion. In the event of the death of a holder, the options are exercisable
for a period of 12 months following the date of death by the person or persons
to whom the holder's rights under the options pass by will or laws of descent
and distribution.
The following stock options are outstanding to officers, directors, employees
and consultants of the Corporation as of December 31, 1998:
<TABLE>
<CAPTION>
EXERCISE PRICE
GROUP NUMBER OF COMMON PER COMMON
(NUMBER OF PERSONS IN GROUP) SHARES UNDER OPTION DATE OF GRANT EXPIRY DATE SHARE(1)
- ---------------------------- ------------------- ------------------- ----------------- --------------
<S> <C> <C> <C> <C>
3 Executive Officers(2)..... 207,700 March 8, 1995 March 1, 2000 $1.77
975,000 February 1, 1996 January 26, 2001 $2.40
1,750,000 July 8, 1997 July 8, 2002 $2.56
1,000,000 February 10, 1998 February 10, 2003 $2.14
1,450,000 May 22, 1998 June 2, 2003 $0.39
1,512,500 October 23, 1998 October 23, 2003 $0.18
87,500 December 15, 1998 October 23, 2003 $0.23
3 Directors(3).............. 225,000 March 8, 1995 March 1, 2000 $1.77
940,000 February 1, 1996 January 26, 2001 $2.40
175,000 April 1, 1997 February 1, 2002 $7.99
950,000 July 8, 1997 July 8, 2002 $2.56
300,000 May 22, 1998 June 2, 2003 $0.39
625,000 October 23, 1998 October 23, 2003 $0.18
25,000 December 15, 1998 October 23, 2003 $0.23
23 Others(4)................ 100,000 March 8, 1995 March 1, 2000 $1.77
346,000 February 1, 1996 January 26, 2001 $2.40
155,000 July 23, 1997 July 23, 2001 $3.52
177,500 April 1, 1997 February 1, 2002 $7.99
435,000 July 8, 1997 July 8, 2002 $2.56
90,000 July 28, 1997 July 28, 2002 $3.32
50,000 October 13, 1997 October 1, 2002 $2.63
70,000 November 20, 1997 November 20, 2002 $2.56
535,000 May 22, 1998 June 2, 2003 $0.39
150,000 October 23, 1998 October 23, 2003 $0.18
25,000 December 15, 1998 October 23, 2002 $0.23
-------------------
Total 12,356,200
</TABLE>
Notes:
(1) The exercise price of all options granted to the holders thereof are in
Canadian dollars. Such exercise price has for the purposes hereof, been
converted into U.S. dollars utilizing a conversion rate of Cdn. $1.52 per
U.S. $1.00.
(2) Includes stock options granted to Mr. Timothy Stephens, James Harvie and
Wade Cherwayko. Mr. Cherwayko ceased to be an executive officer of the
Corporation on February 9, 1998 and as a director of the Corporation on
February 8, 1999. Mr. Cherwayko continues to be a director of a number of
the subsidiaries of the Corporation and continues to be a consultant to
the Corporation.
(3) Directors who are not executive officers.
(4) Includes non-executive officers, employees and consultants.
OTHER COMPENSATION
During the Corporation's fiscal period ended December 31, 1998, the Corporation
accrued and/or paid fees to a law firm for the provision of ongoing legal
services to the Corporation amounting to approximately Cdn. $251,070.99. The
Secretary of the Corporation is a partner of such firm.
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A company wholly owned by Mr. Cherwayko, a director of the Corporation, received
or is entitled to receive from Liberty Technical Services Ltd., a subsidiary of
the Corporation, a gross overriding royalty payment of approximately $1,082,000
for the fiscal year ended December 31, 1998. Liberty has not yet paid the
production royalty.
Other than as set forth herein, the Corporation did not pay any additional
compensation to the executive officers or directors (including personal benefits
and securities or properties paid or distributed which compensation was not
offered on the same terms to all full time employees) during the last completed
fiscal year.
REPORT ON EXECUTIVE COMPENSATION
As of the Record Date, the Compensation Committee of the Corporation's Board of
Directors (the "Compensation Committee") consisted of James Harvie, Daryl Seaman
and Said Arrata. Messrs. Arrata and Seaman subsequently resigned from the Board
of Directors and Compensation Committee on February 8, 1999. The Compensation
Committee is responsible for annually and/or periodically recommending to the
Board of Directors the cash and/or other compensation for the Company's
executive officers and key employees and consultants. Such compensation will
generally be determined by the Board of Directors based on the recommendation of
the Compensation Committee, subject to applicable employment agreements. During
the most recently completed financial year, the majority of the members of the
Compensation Committee are directors who are not employees of the Corporation or
any of its subsidiaries. Set forth below is the Compensation Committee's report
on the compensation policies for year ended December 31, 1998 as they affected
executive officers of the Corporation.
With regard to compensation of executive officers, it is the philosophy of the
Corporation to provide a program which attracts and retains executive officers
and other key employees critical to the Corporation's success and to reward
executive officers for corporate, group and individual performance. Executive
compensation, including to the President and Chief Executive Officer, is
evaluated by the Compensation Committee using the aforementioned subjective
criteria and is not based solely on specific objective criteria such as
profitability of the Corporation or market value of its common shares. However,
it is noted that management has followed a policy of granting compensation which
is largely tied to shareholder value by the issuance of stock options whereby
the value to the parties receiving such grants is thereby tied directly to
increases in overall shareholders' market values. The Chief Executive Officer
also makes recommendations to the Compensation Committee regarding the total
compensation payable to the executives named in the Summary Compensation Table,
other than himself, for each fiscal year, which recommendations the Compensation
Committee has the discretion to accept or modify as it deems appropriate. The
Compensation Committee sets the compensation payable to the Chief Executive
Officer relying on similar factors.
In November 1998, the Board of Directors, based on the recommendation of the
Compensation Committee, awarded incentive stock options commensurate with salary
reductions accepted by two directors and one officer of the Corporation and its
subsidiaries. In addition, a general award of stock options was made based on
responsibility and performance relative to the Corporation's projects. No cash
bonuses were awarded.
Other than Mr. Harvie, none of the members of the Compensation Committee are, or
have been, employees of the Corporation.
At the fiscal year ended December 31, 1998, the Corporation had two executive
officers, being Timothy T. Stephens, the President and Chief Executive Officer
and James S. Harvie, Vice Chairman and Chief
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ABACAN RESOURCE CORPORATION MANAGEMENT INFORMATION CIRCULAR
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Operating Officer. The Corporation currently does not have nor at the completion
of its most recent fiscal year did it have a Chief Financial Officer.
Respectively Submitted by James Harvie
the Compensation Committee Daryl Seaman
Said Arrata
PERFORMANCE GRAPH
In accordance with the requirements of the SECURITIES ACT (Ontario), the
following graph compares cumulative shareholder return over the past five fiscal
periods commencing on July 31, 1995 and ending on December 31, 1998 of the
common shares of the Corporation (assuming a $100 investment was made on July
31, 1995) with the cumulative total return of The Toronto Stock Exchange
Composite 300 Index.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
MONTH/YEAR 07/1995 12/1995 12/1996 12/1997 12/1998
------- ------- ------- ------- -------
Abacan Resource Corporation.. $100 $ 89 $274 $ 52 $ 11
TSE 300 Composite Index...... $100 $102 $128 $145 $140
CORPORATE GOVERNANCE
The Corporation's Board of Directors considers good corporate governance to be
central to the effective and efficient operation of the Corporation and has
assigned ongoing responsibility for matters relating to corporate governance to
the Corporate Governance Committee (the "Governance Committee"). As at the
Record Date and during the most recently completed financial year, the
Governance Committee consists of two unrelated directors, being Daryl Seaman and
Said Arrata, as well as James Harvie, Vice Chairman
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ABACAN RESOURCE CORPORATION MANAGEMENT INFORMATION CIRCULAR
<PAGE>
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and Chief Operating Officer. Messrs. Arrata and Seaman subsequently resigned
from the Board of Directors and Corporate Governance Committee on February 8,
1999. Due to his position as an executive officer, Mr. Harvie is not considered
to be an unrelated director. Mr. Harvie, although not an unrelated director, is
a former governor of the TSE and has broad experience in matters of corporate
governance. The Board intends to continue to assess its corporate governance
methods as part of the Board's ongoing commitment to ensure effective corporate
governance.
At the completion of most recent financial year, the Corporation's Board of
Directors was comprised of six members, two of whom qualify as unrelated
directors by virtue of their independence from management of any interest,
business or other relationship that could materially interfere with the
directors' ability to act in the best interests of the Corporation. The
unrelated directors were Mr. Seaman and Mr. Arrata. None of these directors were
employed by the Corporation, had business interests with the Corporation or had
directly received any remuneration from the Corporation other than stock options
issued to them in their capacity as directors.
The Board are responsible for the stewardship of the Corporation. They have the
responsibility to oversee the conduct of the business, supervise management and
endeavour to ensure that all major issues affecting the business and affairs of
the Corporation are given proper and due consideration. The President and CEO,
along with his management team are responsible for formulating the mission,
strategies and policies of the Corporation and presenting them to the Board for
approval. The Board considers the information provided by the CEO and management
and if appropriate, approves the strategies of the Corporation and the policies
in which it is managed. Once implemented, the Board monitors and evaluates
management's performance on an ongoing basis and provides support and guidance
to the President and CEO in achieving the Corporation's business objectives.
The strategies and policies presented by management and approved by the Board
establish the corporate objectives that the President and CEO is responsible for
meeting and define the limits of management's responsibilities. Matters that may
result in a variance to the approved strategies and policies require Board
approval. In addition, it is the practice of the Board to approve any major
capital expenditures, acquisitions, divestitures or other material transactions,
whether or not specifically set out in the annual business plan.
The Governance Committee has reviewed the composition and operation of the
Corporation's board of directors in light of the TSE's corporate governance
guidelines (the "Guidelines"). In the opinion of the Governance Committee,
circumstances where the Guidelines have not been adhered to are largely due to
the fact that the Corporation has focused its attention and limited resources on
its business and affairs and that consequently, the Corporation has not yet
fully developed the controls and procedures found in more established companies.
The Corporation is committed to the objectives of the corporate governance
Guidelines established by the TSE and will continue to work toward complying
with the objectives set forth therein.
The Corporation has not yet fully addressed all aspects of the TSE Guidelines.
Areas where the Corporation may not be in full compliance with the Guidelines
are as follows:
Guideline 2 - Due to the addition of Mr. Stephens as a member of the
Board in the first quarter of 1998, the Corporation did not have a
majority of unrelated directors during the most recently completed
financial year.
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ABACAN RESOURCE CORPORATION MANAGEMENT INFORMATION CIRCULAR
<PAGE>
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Guideline 4 - The Corporation has not yet established a formal
committee for the purpose of proposing new nominees to the Board.
Notwithstanding this, the Board as a whole has established an
informal process to propose new nominees, which process resulted in
the appointment of Mr. Timothy Stephens as President, CEO and
director in February 1998 and the appointment of Messrs. Kishpaugh
and Rutherford in February 1999.
Guideline 5 - The function of assessing the effectiveness of the
Board of a whole rests with the Governance Committee. The Governance
Committee has not yet fully assessed the performance or
effectiveness of the Board as a whole or the performance of
individual Board members.
Guideline 6 - The Corporation has not yet implemented a formal
education and orientation program for new recruits to the Board. As
time and resources permit, it is the intention of the Corporation to
establish a "Directors Manual" for new and existing directors which
is intended to address different aspects of the Corporation's
business. In the meantime, management will continue to make informal
presentations to the Board respecting the Corporation's ongoing
business and operations.
Guidelines 11 and 12 - In as much as the Board has concentrated its
efforts and attention on the ongoing business operations of the
Corporation, it has not yet had the opportunity to sufficiently
address and document the relationship of the responsibilities
between corporate management and the Board or to develop formal
position descriptions for individual members of the Board or the
Chief Executive Officer. The Governance Committee has been directed
by the Board to review these guidelines and to implement a program
with a view to future compliance.
INDEBTEDNESS OF DIRECTORS AND OFFICERS
No director, executive officer, senior officer or any of their respective
associates or affiliates or any proposed nominee director is or has been at any
time since the beginning of the last completed fiscal year, indebted to the
Corporation or any of its subsidiaries nor has any such person been indebted to
any other entity where such indebtedness is the subject of a guarantee, support
agreement, letter of credit or similar arrangement or understanding, provided by
the Corporation or any of its subsidiaries.
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
AND MATTERS TO BE ACTED UPON
Other than as set forth herein, in the company's Form 10-KSB or as previously
disclosed, the Corporation is not aware of any other material transaction
involving any director, executive officer, proposed nominee for election as a
director or any shareholder holding more than 10% of the voting rights attached
to the common shares or any associate or affiliate of any of the foregoing.
The Corporation is not aware of any other material interest of any director,
executive officer, proposed nominee for election as a director or any associate
or affiliate of any of the foregoing in any matter to be acted upon at the
Meeting.
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COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Corporation's
directors, officers and persons holding more than ten percent of a registered
class of the Corporation's equity securities to file with the Securities and
Exchange Commission and any stock exchange or automated quotation system on
which the common shares may then be listed or quoted (i) initial reports of
ownership, (ii) reports of changes in ownership and (iii) annual reports of
ownership of common shares and other equity securities of the Corporation. Such
directors, officers and ten percent shareholders are also required to furnish
the Corporation with copies of all such filed reports.
Section 16(a) of the Securities and Exchange Act of 1934 was not applicable to
the Corporation's officers, directors and 10% shareholders for the year ended
December 31, 1998. The section became applicable effective January 1, 1999.
Since becoming effective, the Corporation believes that all Section 16(a)
reporting requirements applicable to the Corporation officers, directors and 10%
shareholders have been fulfilled by such persons on a timely basis.
ANNUAL REPORTS
The Corporation's Annual Report to shareholders for the year ended December 31,
1998 accompanies this Management Circular. The Corporation has filed or
anticipates filing its Annual Report and Form 10-KSB for the year ended December
31, 1998 with the Securities and Exchange Commission on or about February 26,
1999. A COPY OF THE FORM 10-KSB, INCLUDING ANY FINANCIAL STATEMENTS AND
SCHEDULES AND A LIST DESCRIBING ANY EXHIBITS NOT CONTAINED THEREIN, MAY BE
OBTAINED WITHOUT CHARGE BY ANY SHAREHOLDER. WRITTEN REQUESTS FOR COPIES OF THE
REPORT SHOULD BE DIRECTED TO ABACAN RESOURCE CORPORATION, SUITE 669, 3050 POST
OAK BLVD, HOUSTON, TEXAS, 77056.
YEAR 2000 CONSIDERATIONS
The Corporation is aware of the issues associated with the two digit programming
code in some existing computer systems which may render such systems incapable
of properly interpreting dates beyond the year 1999, and lead to business
disruptions (the "Year 2000 Issue"). The Corporation has conducted a review of
its computer systems to identify the systems that could be affected by the Year
2000 Issue. The Corporation is satisfied that reasonable steps have been taken
to address the Year 2000 Issue as it applies to the Corporation's systems. The
Corporation will continue to monitor this issue and take the necessary steps for
its computer system to be Year 2000 compliant. However, there can be no
assurance that the systems of other companies on which the Corporation's systems
rely will be converted in a timely manner in order to be year 2000 compliant and
the Corporation cannot estimate or provide any assurances to whether or not that
will have a material effect on the Corporation.
PARTICULARS OF MATTERS TO BE ACTED UPON
To the knowledge of the Board of Directors of the Corporation, the only matters
to be brought before the meeting are those matters set forth in the accompanying
Notice of Meeting. Details regarding the votes required to approve the matters
being presented to the shareholders as well the method by which the votes will
be counted are as set forth below.
The election of directors, as set forth in Proposal 2, will be determined by a
plurality of votes cast by the holders of common shares. Accordingly,
abstentions will have no effect on the outcome of the election of directors.
Cumulative voting for the election of directors is not permitted. The approval
of Proposal
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ABACAN RESOURCE CORPORATION MANAGEMENT INFORMATION CIRCULAR
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3, to effect a reverse stock split, will require the affirmative vote of holders
of two-thirds of the common shares voted at the Meeting in person or by proxy.
Abstentions and non-votes will have no effect. The approval of Proposal 4, to
ratify the selection of the Corporation's accountant, will be determined by a
plurality of the votes cast, and abstentions and non-votes will have no effect.
PROPOSAL 1. REPORT TO SHAREHOLDERS
The Board of Directors of the Corporation have approved all of the information
in the Report to Shareholders that accompanies this present Circular, including
the consolidated audited financial statements delivered therewith for the fiscal
period ended December 31, 1998.
PROPOSAL 2. ELECTION OF DIRECTORS
For this forthcoming year, it is proposed that the board of directors shall
consist of five members. Management therefore intends to place before the
meeting, for approval, with or without modification, a resolution fixing the
board of directors at five members for the next ensuing year. Management does
not contemplate that any of such nominees will be unable to serve as directors;
however, if for any reason any of the proposed nominees do not stand for
election or are unable to serve as such, PROXIES IN FAVOUR OF MANAGEMENT
DESIGNEES WILL BE VOTED FOR ANOTHER NOMINEE IN THEIR DISCRETION UNLESS THE
SHAREHOLDER HAS SPECIFIED IN HIS PROXY THAT HIS SHARES ARE TO BE WITHHELD FROM
VOTING IN THE ELECTION OF DIRECTORS. Each director elected will hold office
until the next annual meeting of shareholders or until his successor is duly
elected, unless his office is earlier vacated in accordance with the Bylaws of
the Corporation.
The following table sets forth the name of each of the persons proposed to be
nominated for election as a director, all positions and offices in the
Corporation presently held by him, his municipality of residence, his principal
occupation at the present and during the preceding five years, the date upon
which he commenced serving as a director, and the number of voting common shares
of the Corporation that he has advised are beneficially owned by him, directly
or indirectly, or over which control or direction is exercised, as of the
Effective Date.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE FOLLOWING
PERSONS TO BE DIRECTORS OF THE CORPORATION FOR THE ENSUING YEAR. IN THE ABSENCE
OF INSTRUCTIONS TO THE CONTRARY, IT IS THE INTENTION OF THE MANAGEMENT
DESIGNEES, NAMED AS PROXY, TO VOTE FOR THE ELECTION OF THOSE PERSONS NOMINATED
BELOW TO THE BOARD OF DIRECTORS.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
NAME AGE POSITION PRINCIPAL OCCUPATION WITHIN LAST FIVE YEARS OWNED OWNED(1)
- ------------------- --- --------------- ------------------------------------------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Timothy T. 46 President, President, Chief Executive Officer and Director 1,000 0.01%
Stephens Chief Executive since February 1998; prior thereto, between March 2,200,000(1)
Houston, Texas Officer 1995 and May 1997, the President and a Director
and Director of Seven Seas Petroleums Inc. (TSE and
NASDAQ); prior thereto, between July 1991 and
March 1995, the Vice President with Enron Capital
and Trade Resources Inc.
James S. Harvie(2) 49 Vice Chairman Vice Chairman, Chief Operating Officer and 350,000 0.33%
Calgary, Alberta and director since June 1997; prior thereto, between 1,625,000(1)
Chief Operating June 1994 and August 1996, the Executive Vice
Officer President of Midland Walwyn Capital Inc.; prior
and Director thereto, President of Deacon Barclay's Canada;
former Governor of The Toronto Stock Exchange.
</TABLE>
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ABACAN RESOURCE CORPORATION MANAGEMENT INFORMATION CIRCULAR
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<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
SHARES OF SHARES
BENEFICIALLY BENEFICIALLY
NAME AGE POSITION PRINCIPAL OCCUPATION WITHIN LAST FIVE YEARS OWNED OWNED(1)
- ------------------- --- --------------- ------------------------------------------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
T. B. ("Tunde") 39 Director Executive Director of Yinka Folawiyo Petroleum Nil Nil
Folawiyo Co. Ltd. (a private Nigerian oil company) and 2,025,000(1)
Lagos, Nigeria Executive Director of Yinka Folawiyo Group of
Companies (an international business conglomerate);
Director of the Corporation and its predecessor
since December, 1993.
James A. 58 Director Chairman and CEO of Merlon Petroleum Nil Nil
Kishpaugh(2) Company, a private company, since 1997. Nil
Houston, Texas Chairman and CEO of Texas International
Company (NYSE) and Phoenix Resources
Company (NASDAQ) from 1978 to 1990. A
director of the Corporation since February 1999.
Kenneth C. 45 Director Vice President and CFO of Scorpion Energy Nil Nil
Rutherford(2) Corporation (TSE) from 1998 to present; President Nil
of Captiva Resource Corporation, a private oil and
gas financial, investment and administrative
services company, from 1993 to present; Vice
President Finance and CFO of Arakis Energy
Corporation (NASDAQ) from December 1996 to
September 1997 and a Director of Arakis from July
1997 to October 1998. A directors of the
Corporation since February 1999.
</TABLE>
Notes:
(1) Percentage based on a total of 114,370,836 issued and outstanding common
shares.
(2) Member of the Audit Committee.
PROPOSAL 3. AMENDMENT TO THE CERTIFICATE OF AMALGAMATION TO EFFECT A REVERSE
STOCK SPLIT
The Corporation's Board of Directors has unanimously approved and determined to
submit to the shareholders of the Corporation an amendment (the "Amendment") to
the Corporations Certificate of Amalgamation to effect a consolidation (reverse
stock split) of the Corporation's common shares (the "Reverse Stock Split").
The Reverse Stock Split will be effected in accordance with a formula based upon
the trading price of the Corporation's common shares during the ten (10) trading
days prior to the filing of the Amendment. Under this formula, the Reverse Stock
Split will be effected pursuant to a conversion rate equal to the lower of (1)
ten shares of the Corporation's presently outstanding common stock; or (2) that
number of common shares obtained by dividing $1.80 by the average of the closing
low bid prices of the Corporation's common shares during the ten (10) trading
days prior to the filing of the Amendment, being converted into one (1) new
share of the Corporation's common stock (the "Conversion Formula"). In the event
that the Conversion Formula would result in the conversion of a fractional
number of shares of the Corporation's presently outstanding common stock into
each new share of the Corporation's common stock, the resulting ratio will be
rounded up to the next whole number. For example, if the average of the closing
low bid prices of the Corporation's common shares during the (10) trading days
prior to the filing of the Amendment were $0.45 per share, the Reverse Stock
Split would result in each four (4) shares of the Corporation's presently
outstanding common shares being converted into one (1) new share of the
Corporation's common shares (the "New Common Share"). By the way of further
example, if the average of the closing low bid prices of the Corporation common
shares during the ten (10) trading days prior to the filing of the Amendment was
$0.40 per share, the Reverse Stock Split would result in each five (5) shares of
the Corporation's presently outstanding common shares being converted into one
(1) New Common Share.
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The Corporation is currently authorized to issue an unlimited number of common
shares, of which 114,370,836 were outstanding on the Record Date. If the Reverse
Stock Split is effected, the number of authorized shares shall remain the same,
but the number of outstanding shares shall be proportionately decreased based on
the Conversion Formula. For example, if the Reverse Stock Split results in each
four (4) shares of the Corporation's presently outstanding shares of common
shares being converted into one (1) New Common Share, the number of outstanding
New Common Shares would be decreased to approximately 28,592,709. The rights and
preferences of the New Common Shares would not be affected by the Reverse Stock
Split.
Each shareholder's percentage ownership of the Corporation and the number of
Corporation shareholders should not materially change as a result of the Reverse
Stock Split.
NASDAQ $1.00 MINIMUM BID REQUIREMENT
The Corporation has received notice from The Nasdaq Stock Market Inc. ("Nasdaq")
that its common shares are not in compliance with the minimum bid requirement
for continued listing on the Nasdaq National Market System. The Company does not
believe that it will be able to satisfy the requirements for continued listing
on Nasdaq's National Market System without giving effect to the Reverse Stock
Split. The Board of Directors is recommending the Reverse Stock Split to allow
the Corporation's common shares to comply with the maintenance requirements for
listing on Nasdaq's National Market. One of the maintenance standards of the
National Market is the requirement that the Corporation's common shares have a
minimum bid price of $1.00 per share (the "$1.00 Minimum Bid").
In the event that the Corporation's common shares do not satisfy the $1.00
Minimum Bid, it will be subject to delisting from Nasdaq's National Market
System and will not be eligible for listing on the Nasdaq's Smallcap Market.
The Board of Directors believes that a delisting from Nasdaq could, among other
things, decrease the liquidity of its outstanding common shares and
consequently, reduce the trading price and increase the transaction costs of
trading such shares. The Board of Directors believes that if the Reverse Stock
Split is approved, the bid price will likely increase over the $1.00 Minimum Bid
which should permit the Company to maintain its listing on the Nasdaq National
Market.
POTENTIAL EFFECTS OF THE REVERSE STOCK SPLIT
If this proposal is approved by the Corporation's shareholders, one New Common
Share will be issued for a multiple number of presently outstanding shares of
common stock based upon the Conversion Formula.
Although the Reverse Stock Split will not, by itself, impact the Corporation's
assets or prospects, the Reverse Stock Split could result in a decrease in the
aggregate market value of the Corporation's equity capital. The Board of
Directors believes that this risk is outweighed by the benefit of compliance
with the Nasdaq National Market maintenance requirements. There can, however, be
no assurance that approval of the Reverse Stock Split will succeed in raising
the bid price of the Corporation's common shares above $1.00, that such price,
if achieved, would be maintained, or if maintained, that the Corporation's
common shares would not be delisted by Nasdaq for other reasons. The Corporation
believes that it is compliant with all of the other maintenance requirements of
the Nasdaq National Market.
The Corporation has made an application to The Toronto Stock Exchange for
approval of the Reverse Stock Split. As at the Record Date, approximately 80% of
the Corporation's common shares are held outside of Canada. The Corporation has
received notification from the TSE that it does not currently meet
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ABACAN RESOURCE CORPORATION MANAGEMENT INFORMATION CIRCULAR
<PAGE>
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the TSE's requirements for a Reverse Stock Split. Consequently, if the
Corporation elects to proceed with the Reverse Stock Split without meeting the
applicable TSE requirements, its common shares will be delisted from the TSE
immediately prior to the completion of the Reverse Stock Split. A delisting of
the Corporation's common shares from the TSE may be materially adverse to the
liquidity of the Corporation's shareholders, particularly shareholders resident
in Canada. If the Corporation's common shares are delisted from the TSE,
Canadian residents would have to trade their shares over the Nasdaq National
Market. Quotations on the Nasdaq National Market are in U.S. dollars.
Consequently all purchases and sales of the Corporation's common shares would be
in U.S. rather than Canadian currency.
OUTSTANDING COMMON SHARES
As of the Record Date, there were outstanding 114,370,836 common shares. The
Corporation may be required to issue additional common shares pursuant to the
stock option agreements referred to in this Circular. Any common shares issued
after the Reverse Stock Split upon the exercise of stock options would be issued
following an adjustment to the exercise price and common shares subject to
exercise based on the Conversion Formula.
AMENDMENT TO THE CERTIFICATE OF AMALGAMATION AND NOTIFICATION OF SHAREHOLDERS
The Amendment has been adopted by unanimous resolution of the Board of
Directors, subject to approval by the Corporation's shareholders. Upon filing of
appropriate documents to effect the Reverse Stock Split, including the amendment
to the Corporation's Certificate of Amalgamation, the Board will notify the
shareholders that the Reverse Stock Split has been effected. Such notification
may be in writing or by issuance of a press release. The Corporation reserves
the right not to file the documents to effect the Reverse Stock Split after the
Amendment has been approved by the Corporation's shareholders if the Corporation
determines that the Amendment would not enable the Corporation to meet the
continued listing requirements of the Nasdaq National Market or if the
Corporation otherwise determines that the Reverse Stock Split is not in the best
interests of the Corporation or its shareholders.
EXCHANGE OF SHARE CERTIFICATES
If the Amendment is approved by the Corporation's shareholders, the Board of
Directors will determine the Reverse Stock Split ratio based upon the Conversion
Formula and the Corporation will file Articles of Amendment with the Registrar
of Corporations for the Province of Alberta. The Reverse Stock Split will become
effective on the date of such filing of the Articles of Amendment (the
"Amendment Date") and the shareholders will be notified on or after the
Amendment Date that the Reverse Stock Split has been effected. The Corporation's
transfer agent will act as the Corporation's exchange agent ( the "Exchange
Agent") for holders of common stock to exchange their certificate representing
shares of the Corporation's common stock.
As soon as practicable after the Amendment Date, shareholders will be notified
and requested to surrender their certificate. Beginning on the Amendment Date,
each certificate representing shares of the Corporation's common stock will be
deemed for all corporate purposes to evidence ownership of New Common Shares. No
fractional shares will be issued nor will payment be made in respect of
fractional shares.
U.S. FEDERAL INCOME TAX CONSEQUENCE OF REVERSE STOCK SPLIT
The following general discussion summarizes certain anticipated federal income
tax consequences with respect to the Reverse Stock Split. This discussion does
not purport to be a complete analysis of all the
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ABACAN RESOURCE CORPORATION MANAGEMENT INFORMATION CIRCULAR
<PAGE>
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potential tax effects that may be relevant to the Corporation or to a particular
shareholder of the Corporation. In addition, this discussion does not address
the U.S. federal income tax consequences relevant to particular categories of
shareholders subject to special treatment under federal income tax laws, such as
dealers in securities, insurance companies, tax-exempt entities, and foreign
individuals and entities. This discussion also does not describe any tax
consequence arising out of the land of any state, locality or foreign
jurisdiction.
This discussion is based upon the U.S. Tax Code, U.S. Treasury Regulations,
Internal Revenue Service ("IRS") rulings, and judicial decisions now in effect,
all of which are subject to change at any time by legislative, judicial, or
administrative action, and any such changes may be retroactively applied in a
manner that could adversely affect the Corporation or a particular shareholder.
However, based on the authorities noted above, the management of the Corporation
believes that the probable tax consequences of the Reverse Stock Split can be
summarized as follows:
1. No gain or loss will be recognized by shareholders as a result of the
exchange of New Common Shares for old common shares pursuant to the
Reverse Stock Split.
2. The tax basis of the New Common Shares received by each shareholder will
equal the tax basis of such shareholder's old common shares surrendered
and exchanged therefor in the stock split.
3. The holding period for the New Common Shares received by each shareholder
will include the holding period for the old common shares of such
shareholder surrendered and exchanged therefor in the Reverse Stock Split,
provided such old common share is a capital asset in the hands of the
shareholder on the effective date of the Reverse Stock Split.
4. The Corporation will not recognize gain or loss as a result of the Reverse
Stock Split.
While the management of the Corporation believes that the foregoing are the
probable tax consequences of the Reverse Stock Split, the Corporation has not
sought a ruling from the IRS with respect to any of the federal income tax
aspects of the Reverse Stock Split. ACCORDINGLY, EACH SHAREHOLDER SHOULD SEEK
INDEPENDENT COUNSEL REGARDING THE POSSIBLE FEDERAL TAX CONSEQUENCES OF THE
TRANSACTIONS WITH RESPECT TO HIS OR HER INDIVIDUAL CIRCUMSTANCES.
The text of the proposed special resolution in respect of the approval of the
Reverse Stock Split of the Corporation's common shares is as follows:
"BE IT RESOLVED AS A SPECIAL RESOLUTION THAT:
1. THE BOARD OF DIRECTORS BE AND IS HEREBY AUTHORIZED TO AMEND THE
ARTICLES OF THE CORPORATION TO GIVE EFFECT TO A CONSOLIDATION
(REVERSE STOCK SPLIT) OF THE CORPORATION'S COMMON SHARES IN
ACCORDANCE WITH THE CONVERSION FORMULA DESCRIBED IN THE
CORPORATION'S MANAGEMENT INFORMATION CIRCULAR PREPARED IN RESPECT OF
THIS MEETING;
2. THE BOARD OF DIRECTORS, IN ITS SOLE DISCRETION, MAY ACT UPON THIS
RESOLUTION TO EFFECT THE ABOVE-NOTED CONSOLIDATION OR, IF DEEMED
APPROPRIATE, MAY CHOSE NOT TO ACT ON THIS RESOLUTION;
3. SHAREHOLDERS SHALL NOT BE ENTITLED TO RECEIVE FRACTIONAL SHARES AS A
RESULT OF THE CONSOLIDATION (REVERSE STOCK SPLIT), OR PAYMENT IN
LIEU THEREOF, AND THE NUMBER OF SHARES ISSUABLE ON THE CONSOLIDATION
(REVERSE STOCK SPLIT) SHALL BE ROUNDED UP TO THE
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NEAREST WHOLE NUMBER OF COMMON SHARES, ALL IN ACCORDANCE WITH THE
CONVERSION FORMULA; AND
4. ANY ONE OR MORE DIRECTORS OR OFFICERS BE AND ARE HEREBY AUTHORIZED,
UPON THE BOARD OF DIRECTORS RESOLVING TO GIVE EFFECT TO THIS
RESOLUTION, TO TAKE ALL NECESSARY STEPS AND PROCEEDINGS, AND TO
EXECUTE AND DELIVER AND FILE ANY AND ALL APPLICATIONS, (INCLUDING,
WITHOUT LIMITATION APPLICATIONS TO STOCK EXCHANGES AND OTHER
REGULATORY BODIES), DECLARATIONS, DOCUMENTS AND OTHER INSTRUMENTS
AND DO ALL SUCH OTHER ACTS AND THINGS (WHETHER UNDER CORPORATE SEAL
OF THE CORPORATION OR OTHERWISE) THAT MAY BE NECESSARY OR DESIRABLE
TO GIVE EFFECT TO THE PROVISIONS OF THIS RESOLUTION."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RESOLUTION AUTHORIZING A
CONSOLIDATION (REVERSE SPLIT) OF THE CORPORATIONS COMMON SHARES. IN THE ABSENCE
OF INSTRUCTIONS TO THE CONTRARY, IT IS THE INTENTION OF THE MANAGEMENT DESIGNEES
NAMED AS PROXY TO VOTE IN FAVOUR OF THE RESOLUTION.
PROPOSAL 4. APPROVAL OF THE RETENTION OF THE INDEPENDENT AUDITORS
The Board of Directors has approved the retention of Deloitte & Touche LLP as
the Corporation's independent auditors for the 1999 fiscal year. Although
shareholder ratification is not required, the Board of Directors has directed
that such appointment be submitted to the shareholders of the Corporation for
ratification at the Meeting. In addition, the Board of Directors in its
discretion may direct the appointment of a new independent accounting firm at
any time during the year if the Board believed that such change is in the best
interests of the Corporation and its shareholders, Deloitte & Touche LLP served
as the Corporation's independent public auditors for the 1998 fiscal year.
It is anticipated that representatives of Deloitte & Touche LLP will be present
at the Meeting and will have an opportunity to make a statement if they desire
to do so, and to respond to any appropriate inquiries from shareholders.
The affirmative vote of the holders of a majority of the issued and outstanding
common shares present and voting at the meeting (excluding abstentions and
broker non-votes, which are not deemed present and voting for this purpose) is
necessary for the adoption of the proposal. If the shareholders do not ratify
the appointment of Deloitte & Touche LLP, the Board of Directors may reconsider
the appointment.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE RETENTION OF
DELOITTE & TOUCHE LLP. IN THE ABSENCE OF CONTRARY INSTRUCTIONS, THE MANAGEMENT
DESIGNEES, IF NAMED AS PROXY, INTEND TO VOTE THE COMMON SHARES REPRESENTED BY
PROXY IN FAVOUR OF THE RESOLUTION APPROVING THE RETENTION OF DELOITTE & TOUCHE
LLP.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Corporation's 2000
Annual Meeting of Stockholders must be received by the Secretary of the
Corporation no later than December 31, 1999 and must otherwise comply with the
requirements of Rule 14a-8 under the Securities Exchange Act of 1934. Such
proposals should be addressed to the Corporation's Secretary, and may be
included in next year's proxy statement, if they comply with certain rules and
regulations promulgated by the Commission. Additionally, the proxy solicited by
the Board for the 2000 Annual Meeting of Stockholders will confer
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ABACAN RESOURCE CORPORATION MANAGEMENT INFORMATION CIRCULAR
<PAGE>
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discretionary authority to vote on any stockholder proposal presented at that
meeting unless the Corporation is provided with notice of such proposal no later
than March 15, 2000.
GENERAL
The contents and the sending of this Management Information Circular have been
approved by the Board of Directors of the Corporation.
CERTIFICATE
The foregoing contains no untrue statement of a material fact and does not omit
to state a material fact that is required to be stated or that is necessary to
make a statement not misleading in the light of the circumstances in which it
was made.
DATED at Houston, Texas, this 1st day of March, 1999.
"SIGNED" "SIGNED"
TIMOTHY T. STEPHENS JAMES S. HARVIE
Chief Executive Officer Director
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- 1 -
ABACAN RESOURCE CORPORATION
INSTRUMENT OF PROXY
FOR THE ANNUAL GENERAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MONDAY, MARCH 29, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Abacan Resource Corporation (the
"Corporation") hereby appoints Mr. Timothy T. Stephens, President of the
Corporation, or failing him, Mr. Edward W. Tapuska, Secretary of the
Corporation, or instead of either of the foregoing, _____________________, as
proxy holder of the undersigned at the Annual General and Special Meeting of
Shareholders (the "Meeting"), to be held on Monday, March 29, 1999 at the J.W.
Marriott Hotel, 5051 Westheimer, Houston, Texas, 77056 at 10:00 a.m. Houston
time, and at any adjournment or adjournments thereof, and at any ballot that may
take place in consequence thereof, and with discretionary authority with respect
to such other matters, not known or determined at the time of solicitation of
the Proxy, as may come before the said meeting or any adjournments thereof to
the same extent and with the same powers as if the undersigned were personally
present at the Meeting. Receipt of the Notice of the Meeting and the Management
Information Circular and Proxy Statement is hereby acknowledged.
THIS INSTRUMENT OF PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE CORPORATION. THE SHARES REPRESENTED BY THIS INSTRUMENT OF PROXY, WHERE
THE SHAREHOLDER HAS SPECIFIED A CHOICE WITH RESPECT TO THE ABOVE MATTERS, WILL
BE VOTED AS DIRECTED BELOW OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED "FOR"
SUCH MATTERS. Without limiting the general powers hereby conferred, the
undersigned hereby directs the said proxyholder to vote the shares represented
by this instrument of proxy in the following manner:
1. FOR [ ] or AGAINST [ ] the resolution setting the number of directors to be
elected at five.
2. [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY for all
(except as otherwise indicated nominees listed below
below)
INSTRUCTION: To withhold authority to vote for any of the nominees listed
below, draw a line through such nominee's name.
Nominees: Timothy T. Stephens, James S. Harvie, T.B. ("Tunde") Folawiyo,
James A. Kishpaugh, Kenneth C. Rutherford
3. FOR [ ] or AGAINST[ ] the resolution authorizing the board of directors in
its sole discretion, to amend the Articles of the
Corporation to give effect to a consolidation
(reverse split) of the Corporation's common shares
in accordance with the Conversion Formula described
in the Management Information Circular.
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4. FOR [ ] or WITHHOLD [ ] the re-appointment of Deloitte & Touche, L.L.P.,
as the Auditor of the Corporation for the ensuing
year.
5. At the discretion of the said proxyholder, upon any amendment or variation
of the above matters or any other matter that may be properly brought
before the Meeting or any adjournment thereof, in such manner as such
proxy, in such proxyholder's sole judgment, may determine.
EACH SHAREHOLDER HAS THE RIGHT TO APPOINT A PROXYHOLDER OTHER THAN THE
PERSONS DESIGNATED ABOVE, WHO NEED NOT BE A SHAREHOLDER, TO ATTEND AND ACT FOR
HIM AND ON HIS BEHALF AT THE MEETING. To exercise such right, the names of the
nominees of management should be crossed out and the name of the shareholder's
appointee should be legibly printed in the blank space provided. Such
shareholder should notify the nominee of his appointment, obtain his consent to
act as proxy and should instruct him on how the shareholder's shares are to be
voted. In any case, this Instrument of Proxy should be dated and executed by the
shareholder or his attorney authorized in writing, with proof of such
authorization attached, where an attorney executed this Instrument of Proxy.
THE UNDERSIGNED HEREBY revokes any former proxies previously given.
DATED this ____ day of _____________________, 1999.
(signature of shareholder)
(name of shareholder - Please Print)
NOTES:
1. This Instrument of Proxy will not be
valid and will not be acted upon
or voted unless it is completed as
outlined herein and delivered to the
Corporation c/o the offices of Montreal
Trust Company, 6th Floor, 530
- 8th Avenue S.W., Calgary, Alberta,
Canada, T2P 3S8, at least forty-
eight (48) hours, excluding Saturdays and
holidays, before the time set
for the Meeting or any adjournment
thereof.
2. If the shareholder is an individual, this
Instrument of Proxy must be executed by the
shareholder or his attorney authorized in
writing.
3. Joint owners should each sign this
Instrument of Proxy.
4. If the shareholder is a corporation, this
Instrument of Proxy must be executed under
corporate seal or by a duly authorized
officer or attorney of the Corporation.
5. Persons signing as executors,
administrators, trustees, etc. should so
indicate and give their full title as such.
