<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
[X] Filed by the Registrant
[_] 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 (S)240.14a-11(c) or (S)240.14a-12
BRIGHAM EXPLORATION COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 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 (set forth the amount on which the filing fee
is calculated and state how it was determined):
------------------------------------------------------------------------
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>
BRIGHAM EXPLORATION COMPANY
6300 BRIDGE POINT PARKWAY
BUILDING TWO, SUITE 500
AUSTIN, TEXAS 78730
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2000
To the Stockholders of
BRIGHAM EXPLORATION COMPANY:
Notice is hereby given that the Annual Meeting of Stockholders of Brigham
Exploration Company, a Delaware corporation (the "Company"), will be held on
Thursday, May 18, 2000, at 1:00 p.m., local time, at the Company's offices at
6300 Bridge Point Parkway, Building Two, Suite 500, Austin, Texas, for the
following purposes:
1. To elect six directors to serve until the Annual Meeting of Stockholders
in 2001;
2. To consider and vote on a proposal to amend the Certificate of
Incorporation of the Company to increase the number of authorized shares
of Common Stock of the Company to 50,000,000;
3. To consider and vote upon a proposal to amend the Company's 1997
Incentive Plan to change the number of shares of Common Stock available
under the Plan;
4. To approve the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the year ending December 31, 2000; and
5. To transact such other business as may properly come before the meeting
or any adjournment(s) thereof.
Only stockholders of record at the close of business on March 31, 2000 are
entitled to notice of, and to vote at, the meeting or any adjournment(s)
thereof.
You are cordially invited and urged to attend the meeting, but if you are
unable to attend, please sign and date the enclosed proxy and return it
promptly in the enclosed self-addressed stamped envelope. A prompt response
will be appreciated. If you attend the meeting, you may vote in person, if you
wish, whether or not you have returned your proxy. In any event, a proxy may
be revoked at any time before it is exercised.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE APPEARS HERE]
DAVID T. BRIGHAM
Secretary
April 20, 2000
Austin, Texas
<PAGE>
BRIGHAM EXPLORATION COMPANY
6300 BRIDGE POINT PARKWAY
BUILDING TWO, SUITE 500
AUSTIN, TEXAS 78730
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 2000
SOLICITATION OF PROXIES
SOLICITATION AND REVOCABILITY OF PROXIES
This proxy statement is furnished to holders of Brigham Exploration Company
("Brigham" or the "Company") common stock, $0.01 par value ("Common Stock"),
in connection with the solicitation of proxies on behalf of the Board of
Directors of the Company for use at the Annual Meeting of Stockholders of
Brigham to be held on Thursday, May 18, 2000, at 1:00 p.m., local time, at the
Company's offices at 6300 Bridge Point Parkway, Building Two, Suite 500,
Austin, Texas, and at any adjournment(s) thereof, for the purposes set forth
in the accompanying Notice of Annual Meeting of Stockholders.
Shares represented by a proxy in the form enclosed, duly signed, dated and
returned to the Company and not revoked, will be voted at the meeting in
accordance with the directions given, but in the absence of directions to the
contrary, such shares will be voted (i) for the election of the Board's
nominees for directors, (ii) for the amendment to the Certificate of
Incorporation, (iii) for the amendment to the 1997 Incentive Plan, (iv) for
the appointment of PricewaterhouseCoopers LLP as independent auditors of the
Company for the year ending December 31, 2000, and (v) in accordance with the
best judgment of the persons voting on any other proposals that may come
before the meeting. The Board of Directors knows of no other matters, other
than those stated in the foregoing notice, to be presented for consideration
at the meeting or any adjournment(s) thereof. If, however, any other matters
properly come before the meeting or any adjournment(s) thereof, it is the
intention of the persons named in the enclosed proxy to vote such proxy in
accordance with their judgment on any such matters. The persons named in the
enclosed proxy may also, if it is deemed to be advisable, vote such proxy to
adjourn the meeting from time to time.
Any stockholder executing and returning a proxy has the power to revoke it
at any time before it is voted by delivering to the Secretary of the Company,
6300 Bridge Point Parkway, Building Two, Suite 500, Austin, Texas 78730, a
written revocation thereof or by duly executing a proxy bearing a later date.
Any stockholder attending the Annual Meeting of Stockholders may revoke his
proxy by notifying the Secretary at such meeting and voting in person.
Attendance at the Annual Meeting will not by itself revoke a proxy.
The approximate date on which this proxy statement and the form of proxy
are first mailed to stockholders is April 20, 2000.
The cost of soliciting proxies will be borne by the Company. Solicitation
may be made, without additional compensation, by directors, officers and
regular employees of the Company in person or by mail, telephone or telegram.
The Company may also request banking institutions, brokerage firms,
custodians, trustees, nominees and fiduciaries to forward solicitation
material to the beneficial owners of the Common Stock held of record by such
persons, and Brigham will reimburse the forwarding expense. All costs of
preparing, printing and mailing the form of proxy and the material used in the
solicitation thereof will be borne by the Company.
SHARES OUTSTANDING AND VOTING RIGHTS
The close of business on March 31, 2000 is the record date for
determination of stockholders entitled to notice of and to vote at the meeting
or any adjournment(s) thereof. The only voting security of the Company
outstanding is the Common Stock, each share of which entitles the holder
thereof to one vote. At the record date for the meeting, there were
outstanding and entitled to be voted 16,712,908 shares of Common Stock.
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The table below sets forth information concerning (i) the only persons
known by the Company, based upon statements filed by such persons pursuant to
Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to own beneficially in excess of 5% of the Common Stock as of
March 31, 2000, and (ii) the shares of Common Stock beneficially owned, as of
March 31, 2000, by each director of the Company, each executive officer listed
in the Summary Compensation Table included elsewhere in this proxy statement,
and all directors and executive officers of the Company as a group. Except as
indicated, each individual has sole voting power and sole investment power
over all shares listed opposite his name.
<TABLE>
<CAPTION>
Common Stock
Beneficially
Owned(1)
------------------
Number of Percent
Name and Address of Beneficial Owner Shares of Class
------------------------------------ --------- --------
<S> <C> <C>
General Atlantic Partners, L.L.C.(2)...................... 4,107,956 24.11%
3 Pickwick Plaza
Greenwich, Connecticut 06830
Ben M. and Anne L. Brigham(3)............................. 3,719,792 22.26%
6300 Bridge Point Parkway, Building Two, Suite 500
Austin, Texas 78730
Shell Capital Inc.(4)..................................... 3,397,436 16.89%
910 Louisiana, Room 4555D
Houston, Texas 77002-2463
Enron North America Corp.(5).............................. 2,052,632 11.59%
1400 Smith Street
Houston, Texas 77002
Resource Investors Management Company(6).................. 1,754,464 10.50%
600 Travis Street, Suite 6875
Houston, Texas 77002
Veritas DGC Land, Inc..................................... 1,211,580 7.25%
3701 Kirby Drive, Suite 112
Houston, Texas 77098-3982
Special Situations Private Equity Fund, L.P.(7)........... 975,609 5.75%
153 East 53rd Street, 55th Floor
New York, New York 10022
David T. Brigham(8)....................................... 110,033 *
Curtis F. Harrell(9)...................................... 298 *
A. Lance Langford(10)..................................... 44,474 *
Karen E. Lynch(11)........................................ 31,295 *
Harold D. Carter(12)...................................... 315,193 1.89%
Alexis M. Cranberg(13).................................... 300 *
Stephen P. Reynolds(14)................................... 300 *
W. Craig Childers(15)..................................... -- --
Jon L. Glass(16).......................................... 171,132 1.02%
All directors and executive officers as a group (11
persons)(17)............................................. 4,239,353 18.83%
</TABLE>
- --------
* Represents less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or disposition power with respect to
securities.
(2) Includes 2,679,418 shares held by General Atlantic Partners III, L.P.
("GAP III"); and 127,725 shares held by GAP-Brigham Partners, L.P. ("GAP-
Brigham") and 975,610 shares held by GAP Coinvestment Partners II, L.P.
("GAP Coinvestment") and shares of stock issuable upon the exercise of
325,203
2
<PAGE>
currently exercisable warrants held by GAP Coinvestment. Stephen P.
Reynolds is the general partner and a limited partner in GAP-Brigham,
President of GAP III Investors, Inc., the general partner of GAP III, and
a limited partner of GAP Coinvestment.
(3) Includes 1,830,514 shares owned by Ben M. Brigham and 1,821,010 shares
owned by Anne L. Brigham, who are husband and wife; 27,022 shares owned
by Ben M. Brigham and Anne L. Brigham as Trustees under Brigham Parental
Trust I; 28,246 shares owned by Ben M. Brigham and Anne L. Brigham as
Trustees under Brigham Parental Trust II; and 13,000 shares held by David
T. Brigham, as custodian for each of Mr. and Mrs. Brigham's four children
under the Texas Uniform Transfers to Minors Act.
(4) Consists of currently exercisable warrants to purchase 3,397,436 shares
of Common Stock, calculated based on the Company's $58 million of
outstanding borrowings under its senior credit facility as of March 31,
2000.
(5) Enron North America Corp. ("Enron N.A.") may be deemed beneficially to
own 2,052,632 shares as a result of the holdings of ECT Merchant
Investments Corp. ("ECT Investments") and Joint Energy Development
Investments II Limited Partners ("JEDI II"). ECT Investments holds
263,158 shares and warrants to purchase 250,000 shares, and JEDI II holds
789,474 shares and warrants to purchase 750,000 shares. ECT Investments
is a wholly owned subsidiary of Enron N.A. Because a subsidiary of Enron
N.A. is the general partner of Enron Capital Management II Limited
Partnership, which is in turn the general partner of JEDI II, Enron N.A.
may be deemed to be the beneficial owner of the shares owned by JEDI II,
although Enron N.A. disclaims beneficial ownership of these shares. Enron
N.A. is a wholly owned subsidiary of Enron Corp. ("Enron"); Enron
disclaims beneficial ownership of any shares beneficially owned by either
Enron N.A. or JEDI II.
(6) Includes 612,308 shares held by RIMCO Partners, L.P. II, 307,031 shares
held by RIMCO Partners, L.P. III and 835,125 shares held by RIMCO
Partners, L.P. IV (collectively, the "RIMCO Partnerships"). Resource
Investors Management Company ("RIMCO") is the general partner of each of
the RIMCO Partnerships. The general partner of RIMCO is RIMCO Associates,
Inc.
(7) Includes 243,902 shares of Common Stock issuable upon the exercise of
currently exercisable warrants.
(8) Includes 44,643 shares of vested restricted stock; 13,000 shares held as
a custodian under the Texas Uniform Transfers to Minors Act for the
children of Ben M. Brigham and Anne L. Brigham; 2,000 shares gifted by
Ben M. Brigham and Anne L. Brigham; and 50,390 shares of Common Stock
issuable upon exercise of certain vested stock options.
(9) Includes 249 shares held indirectly by R. Chaney Partners III L.P. and 49
shares held indirectly by R. Chaney Partners IV L.P.
(10) Includes 39,700 shares of Common Stock issuable upon exercise of certain
vested stock options.
(11) Includes 30,670 shares of Common Stock issuable upon exercise of certain
vested stock options.
(12) Includes 300 shares of Common Stock issuable upon exercise of certain
vested stock options.
(13) Includes 300 shares of Common Stock issuable upon exercise of certain
vested stock options. Alexis Cranberg is the President of Aspect
Resources LLC ("Aspect"). As such, Mr. Cranberg may be deemed to share
voting and investment power with respect to 487,805 shares of Common
Stock held by Aspect and 162,602 shares of Common Stock issuable upon the
exercise of currently exercisable warrants held by Aspect. Mr. Cranberg
disclaims beneficial ownership of shares owned by Aspect except to the
extent of his pecuniary interest therein.
(14) Includes 300 shares of Common Stock issuable upon exercise of certain
vested stock options. Stephen P. Reynolds is the general partner and a
limited partner in GAP-Brigham, President of GAP III Investors, Inc., the
general partner of GAP III, and a limited partner of GAP Coinvestment. As
such, Mr. Reynolds may be deemed to share voting and investment power
with respect to the 2,679,418 shares held by GAP III, 127,725 shares held
by GAP-Brigham and 975,610 shares held by GAP Coinvestment and 325,203
shares of Common Stock issuable upon the exercise of currently
exercisable warrants held by GAP Coinvestment. Mr. Reynolds disclaims
beneficial ownership of shares owned by GAP III, GAP-Brigham, and GAP
Coinvestment except to the extent of his pecuniary interest therein.
(15) Mr. Childers was a Managing Director of Enron N.A. in 1998 and 1999, and
was a Director of the Company from August 1998 through November 1999.
(16) Includes 66,964 shares of vested restricted stock; and 104,168 shares of
Common Stock issuable upon exercise of certain vested stock options. Mr.
Glass served as the Company's Vice President of Exploration and a
Director until September 30, 1999.
(17) Includes 150,328 shares of Common Stock issuable upon exercise of certain
vested stock options.
3
<PAGE>
PROPOSAL 1.
ELECTION OF DIRECTORS
The business and affairs of the Company are managed by and under the
direction of the Board of Directors, which exercises all corporate powers of
the Company and establishes broad corporate policies.
The Company's Board of Directors formed standing audit and compensation
committees on February 26, 1997. Members of the Audit Committee and the
Compensation Committee are currently Harold D. Carter, Alexis M. Cranberg and
Stephen P. Reynolds. The Audit Committee's primary responsibilities are to (i)
recommend the Company's independent auditors to the Board of Directors, (ii)
review with the Company's auditors the plan and scope of the auditor's annual
audit, the results thereof and the auditors' fees, (iii) review the Company's
financial statements and (iv) take such other action as it deems appropriate
as to the accuracy and completeness of financial records of the Company and
financial information gathering, reporting policies and procedures of the
Company. The Compensation Committee exercises the power of the Board of
Directors in connection with all matters relating to compensation of executive
officers, employee benefit plans and the administration of the Company's stock
option programs.
In 1999, the Board of Directors held ten meetings, the Audit Committee held
one meeting and the Compensation Committee held two meetings. Mr. Reynolds
attended six and Mr. Cranberg attended seven of the ten Board of Directors
meetings held in 1999. No other director attended fewer than 75% of the
meetings of the Board of Directors held during the period for which he or she
was a director or meetings held by committees of the Board of Directors on
which he or she served during the period for which he or she was a member of
such committee.
All duly submitted and unrevoked proxies will be voted for the nominees for
directors selected by the Board of Directors, except where authorization so to
vote is withheld. If any nominee(s) should become unavailable for election for
any presently unforeseen reason, the persons designated as proxies will have
full discretion to cast votes for another person(s) designated by the Board.
With regard to the election of directors, votes may be cast in favor of or
withheld from each nominee. The six nominees who receive a plurality of the
votes cast by stockholders present or represented by proxy at the Annual
Meeting, and entitled to vote on the election of directors, will be elected as
directors of the Company. Thus, any abstentions, "broker non-votes" (shares
held by brokers or nominees as to which they have no discretionary authority
to vote on a particular matter and have received no instructions from the
beneficial owners or persons entitled to vote thereon) or other limited
proxies will have no effect on the election of directors.
The six nominees of the Board of Directors of the Company are named below.
Each of the nominees has consented to serve as a director if elected. Set
forth below is certain information with respect to the nominees, including
information as to each nominee's age as of April 20, 2000, position with the
Company, business experience during the past five years and directorships of
publicly held companies.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION
OF THE NOMINEES LISTED BELOW.
Ben M. "Bud" Brigham, age 40, has served as Chief Executive Officer,
President and Chairman of the Board of the Company since founding the Company
in 1990. From 1984 to 1990, Mr. Brigham served as an exploration geophysicist
with Rosewood Resources, an independent oil and gas exploration and production
company. Mr. Brigham began his career in Houston as a seismic data processing
geophysicist for Western Geophysical, a provider of 3-D seismic services,
after earning his B.S. in Geophysics from the University of Texas. Mr. Brigham
is the husband of Anne L. Brigham, Director, and the brother of David T.
Brigham, Vice President--Land and Administration and Corporate Secretary.
Anne L. Brigham, age 38, has served as a Director of the Company since its
inception in 1990. Ms. Brigham served as Executive Vice President of the
Company from 1990 to March 1999, and served as Corporate Secretary
4
<PAGE>
of the Company from 1990 to February 1998. Before joining the Company full-
time in 1991, Ms. Brigham practiced law in the oil and gas and real estate
sections of Thompson & Knight, P.C. Ms. Brigham worked as a geologist for Hunt
Petroleum Corporation, an independent oil and gas exploration and production
company, for over two years before attending law school. Ms. Brigham holds a
B.S. in Geology from the University of Texas and a J.D. from Southern
Methodist University. Ms. Brigham is the wife of Ben M. Brigham, Chairman,
Chief Executive Officer and President, and the sister-in-law of David T.
Brigham, Vice President--Land and Administration and Corporate Secretary.
Harold D. Carter, age 61, has served as a Director of and consultant to the
Company since 1992. Mr. Carter has more than 30 years experience in the oil
and gas industry and has been an independent consultant since 1990. Prior to
consulting, Mr. Carter served as Executive Vice President of Pacific
Enterprises Oil Company (USA). Before that, Mr. Carter was associated for 20
years with Sabine Corporation, ultimately serving as President and Chief
Operating Officer from 1986 to 1989. Mr. Carter consults for Endowment
Advisors, Inc. with respect to its EEP Partnerships and Associated Energy
Managers, Inc. with respect to its Energy Income Fund, L.P. and is a director
of Abraxas Petroleum Corporation, a publicly traded oil and gas company, and
Energy Partners, Ltd., a private company. Mr. Carter has a B.B.A. in Petroleum
Land Management from the University of Texas and has completed the Program for
Management Development at the Harvard University Business School.
Alexis M. Cranberg, age 44, has served as a Director of the Company since
1992. Mr. Cranberg is President of Aspect Management, Inc. and Aspect
Resources, LLC, each a private oil and gas exploration and investment company.
In addition, Mr. Cranberg is a director for Esenjay Exploration, Inc., a
publicly traded oil and gas company, and Westport Oil & Gas, a private oil and
gas company. Mr. Cranberg is a past director of General Atlantic Resources,
Inc. and United Meridian Corporation. He holds a B.S. in Petroleum Engineering
from the University of Texas and an M.B.A. from Stanford University.
Curtis F. Harrell, age 36, has served as Chief Financial Officer and
Director of the Company since August 1999. From 1997 to August 1999, he was
Executive Vice President and Partner at R. Chaney & Company, Inc., an equity
investment firm focused on the energy industry, where he managed the firm's
investment origination efforts in the U.S., focusing on investments in
corporate equity securities of energy companies in the exploration and
production and oilfield service industry segments. From 1995 to 1997, Mr.
Harrell was a Director of Domestic Corporate Finance for Enron Capital & Trade
Resources, Inc., where he was responsible for initiating and executing a
variety of debt and equity financing transactions for independent exploration
and production companies. Before joining Enron Capital & Trade Resources, Mr.
Harrell spent eight years working in corporate finance and reservoir
engineering positions for two public independent exploration and production
companies, Kelley Oil & Gas Corporation and Pacific Enterprises Oil Company,
Inc. He has a B.S. in Petroleum Engineering from the University of Texas at
Austin and an M.B.A. from Southern Methodist University.
Stephen P. Reynolds, age 48, has served as a Director of the Company since
1996. Mr. Reynolds is a special advisor to General Atlantic Partners, LLC
("GAP LLC") and has been with GAP LLC or its predecessor entities since April
1980. Mr. Reynolds is also President of GAP III Investors, Inc., the general
partner of General Atlantic Partners III, L.P., a general partner and limited
partner of GAP-Brigham Partners, L.P., and a limited partner of GAP
Coinvestment Partners II, L.P. Mr. Reynolds is on the board of directors of
Solo Serve Corporation, a publicly traded off-price soft goods retail company,
Computer Learning Centers, Inc., a publicly traded company providing
technology related training, and SS&C Technologies, Inc., a publicly traded
software and programming company. Mr. Reynolds holds a B.A. in Economics from
Amherst College and a Masters degree in Accounting from New York University.
Compensation of Directors
Fees and Expenses; Other Arrangements. Directors who are also employees of
the Company are not separately compensated for serving on the Board of
Directors. Directors who are not employees of the Company receive $5,000 per
year and $500 per meeting for their services as directors. In addition, the
Company reimburses Directors for the expenses incurred in connection with
attending meetings of the Board of Directors and its committees.
5
<PAGE>
Pursuant to a consulting agreement with Harold D. Carter, the Company paid
Mr. Carter $7,200 per month and reimbursed his out-of-pocket expenses during
1998 for the performance of consulting and advisory services regarding the
operations of the Company as the Company requested. During 1999, the Company
paid Mr. Carter $4,000 per month and reimbursed his out-of-pocket expenses for
the performance of consulting and advisory services as the Company requested.
Effective as of January 1, 2000, Mr. Carter's consulting agreement was amended
to reduce the consulting fee to $2,500 per month plus reimbursement of out-of-
pocket expenses. In addition to the consulting fee, pursuant to the terms of
Mr. Carter's consulting agreement, the Company paid Associated Energy
Managers, Inc. $1,000 per month in 1998 and 1999 and will continue to pay such
monthly amount in 2000 to offset a portion of Mr. Carter's office overhead
expenses and provide the Company with limited use of part of Mr. Carter's
office space for purposes of conducting business while employees of the
Company are in Dallas, Texas.
Director Stock Options. Pursuant to the Company's 1997 Director Stock
Option Plan, each newly elected nonemployee director shall be granted an
option to purchase 1,000 shares of Common Stock and each nonemployee director
will receive an option to purchase 500 shares of Common Stock on December 31
of each year. The options under the plan are granted at fair market value on
the grant date and become exercisable, subject to certain conditions, in five
equal annual installments on the first five anniversaries of the grant date.
The options terminate ten years from the grant date, unless terminated sooner.
25,000 shares of Common Stock have been authorized and reserved for issuance
pursuant to the plan. Options to purchase 2,000 shares of Common Stock were
granted in 1999 to the Company's four nonemployee directors pursuant to the
1997 Directors Stock Option Plan.
Compliance with Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the 1934 Act requires directors and officers of the
Company, and persons who own more than 10% of the Common Stock, to file with
the SEC initial reports of ownership and reports of changes in ownership of
the Common Stock. Directors, officers and more than 10% stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, based solely on a review of
the copies of such reports furnished to the Company and written
representations that no other reports were required, during the year ended
December 31, 1999, all Section 16(a) filing requirements applicable to its
directors, officers and more than 10% beneficial owners were met.
6
<PAGE>
Compensation of Executive Officers
Summary Compensation
The following table sets forth certain summary information concerning the
compensation paid or awarded to the Chief Executive Officer of the Company and
certain other executive officers of the Company who earned in excess of
$100,000 in 1999 (the "named executive officers") for the years indicated.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------- ------------ Shares
Name and Principal Restricted Underlying All Other
Position Year Salary ($) Benefits ($)(1) Stock Awards Options Compensation ($)(2)
------------------ ---- ---------- --------------- ------------ ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Ben M. Brigham.......... 1999 254,925 -- -- -- 6,596
Chief Executive
Officer, President 1998 277,062 160,750 -- -- 6,451
and Chairman of the
Board 1997 258,725 30,600 -- -- 6,236
Curtis F. Harrell(3).... 1999 100,005 68,550 -- 150,000 --
Chief Financial Officer
and Director
Karen E. Lynch(4)....... 1999 128,800 -- -- 65,000 --
Vice President and 1998 120,134 41,824 -- 50,000(6) --
General Counsel 1997 24,130 9,500 -- 50,000(6) --
Jon L. Glass(5)......... 1999 125,351 -- -- 35,000(8) --
Former Vice President-- 1998 160,000 64,003 -- 10,000(7)(8) --
Exploration 1997 127,301 43,268 66,964 208,334(8) --
David T. Brigham........ 1999 123,815 -- -- 60,000 --
Vice President--Land
and 1998 124,917 36,294 -- 45,000(7) --
Administration, 1997 108,895 32,712 44,643 69,445 --
Corporate Secretary
A. Lance Langford....... 1999 112,933 -- -- 65,000 --
Vice President--
Operations 1998 121,000 32,811 -- 65,000(9) --
1997 110,044 40,537 -- 52,085 --
</TABLE>
- --------
(1) Includes the following moving allowances granted to employees in
connection with the Company's relocation of its corporate headquarters
from Dallas, Texas, to Austin, Texas: in 1997, Ben M. Brigham--$30,600;
Jon L. Glass--$12,076; David T. Brigham--$17,529; A. Lance Langford--
$20,949; and Karen E. Lynch--$7,500; in 1998, Jon L. Glass--$25,750; and
Karen E. Lynch--$6,750. Includes moving allowances granted to Curtis F.
Harrell of $68,550 in connection with his relocation to Austin, Texas in
1999.
(2) Consists of premiums paid by the Company under life and disability
insurance plans of $2,702 and $3,894, respectively, in 1999; $2,647 and
$3,804, respectively, in 1998; and $2,612 and $3,624, respectively, in
1997.
(3) Mr. Harrell joined the Company as Chief Financial Officer and Director in
August 1999.
(4) Ms. Lynch joined the Company as General Counsel in October 1997 and has
served as Vice President and General Counsel since February 1998.
(5) Mr. Glass served as Vice President--Exploration of the Company through
September 30, 1999.
(6) Represents 50,000 shares underlying options that were issued in October
1997 and were canceled and reissued in January 1998 and in December 1998.
(7) Includes 5,000 shares underlying options that were issued in January 1998
and were canceled and reissued in December 1998.
(8) Includes shares underlying options that have been forfeited of 35,000,
10,000 and 104,166 in 1999, 1998 and 1997, respectively.
(9) Includes 25,000 shares underlying options that were issued in January 1998
and were canceled and reissued in December 1998.
7
<PAGE>
Option Grants
The following table contains information about stock option grants to the
named executive officers in 1999:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZED VALUE
AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
APPRECIATION
FOR OPTION
INDIVIDUAL GRANTS TERM(1)
------------------------- --------------
NUMBER OF % OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
---- ----------- ------------ ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Ben M. Brigham.......... -- -- -- -- -- --
Curtis F. Harrell....... 150,000 23.1% 2.500 8/31/06 -- 73,500
Karen E. Lynch.......... 35,000 5.4% 2.375 6/01/06 -- 21,525
30,000 4.6% 2.547 8/17/06 -- 13,290
Jon L. Glass............ 35,000(2) 5.4% 2.375 8/31/06 -- 21,525
David T. Brigham........ 35,000 5.4% 2.375 6/01/06 -- 21,525
25,000 3.9% 2.547 8/17/06 -- 11,075
A. Lance Langford....... 35,000 5.4% 2.375 6/01/06 -- 21,525
30,000 4.6% 2.547 8/17/06 -- 13,290
</TABLE>
- --------
(1) Amounts represent hypothetical gains that could be achieved for the
options if they are exercised at the end of the option term. Those gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date such options had been granted, through
the expiration date. For the option terms ending June 1, 2006, August 17,
2006, and August 31, 2006, based on the closing price on the Nasdaq Stock
Market of the Common Stock of $1.5312 on December 31, 1999, a share of the
Common Stock would have a value on each of the ending dates of the option
terms of approximately $2.16 at an assumed appreciation rate of 5% and
approximately $2.99 at an assumed appreciation rate of 10%.
(2) Includes 35,000 shares underlying options that have been forfeited.
Option Exercises and Year-End Option Values
The following table provides information about the number of shares issued
upon option exercises by the named executive officers during 1999, and the
corresponding value realized by the named executive officers. The table also
provides information about the number and value of options that were held by
the named executive officers at December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON OPTIONS AT FY-END (#) FY-END ($)
EXERCISE VALUE ------------------------- -------------------------
NAME (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ben M. Brigham.......... -- -- -- -- -- --
Curtis F. Harrell....... -- -- -- 150,000 -- --
Karen E. Lynch.......... -- -- 16,670 98,330 -- --
Jon L. Glass............ -- -- 104,168 -- -- --
David T. Brigham........ -- -- 34,723 139,722 -- --
A. Lance Langford....... -- -- 17,365 164,720 -- --
</TABLE>
8
<PAGE>
Board Report on Executive Compensation Policy
The Company's executive compensation policy is designed to attract,
motivate, reward and retain the key executive talent necessary to achieve the
Company's business objectives and contribute to the long-term success of the
Company. In order to meet these goals, the Company's compensation policy for
its executive officers focuses primarily on determining appropriate salary
levels and providing long-term stock-based incentives. To a lesser extent, the
Company's compensation policy also contemplates performance-based cash
bonuses. The Company's compensation principles for the Chief Executive Officer
are identical to those of the Company's other executive officers.
Cash Compensation. In determining its recommendations for adjustments to
officers' base salaries (excluding the Chief Executive Officer), the Company
focuses primarily on the scope of each officer's responsibilities, each
officer's contributions to the Company's success in moving toward its long-
term goals during the twelve months immediately preceding his or her hire
date, the accomplishment of goals set by the officer, the Company's assessment
of the quality of services rendered by the officer, comparison with
compensation for officers of comparable companies and an appraisal of the
Company's financial position. In certain situations, the Company may also pay
cash bonuses, the amount of which will be determined based on the contribution
of the officer and the benefit to the Company of the transaction or
development. In March 1999, with the expectation for continuing difficult
industry conditions, the Company announced a 10% salary reduction for all
employees, including officers, except that the Chief Executive Officer elected
to take a 15% salary reduction. The salary reductions became effective as of
May 1, 1999. In addition, there were no cash bonuses, except for moving
allowances, paid to employees, including officers, in 1999. In February 2000,
the Compensation Committee made adjustments to certain executive officers'
salaries based upon the information available with respect to the performance
of the officers and the Company for the preceding twelve months.
Equity Compensation. The grant of stock options to executive officers
constitutes an important element of long-term compensation for the executive
officers. The grant of stock options increases management's equity ownership
in the Company with the goal of ensuring that the interests of management
remain closely aligned with those of the Company's stockholders. The Board
believes that stock options in the Company provide a direct link between
executive compensation and stockholder value. By attaching vesting
requirements, stock options also create an incentive for executive officers to
remain with the Company for the long term.
Chief Executive Officer Compensation. The factors and criteria upon which
the salary of Ben M. Brigham, the Chief Executive Officer, is based are
similar to the criteria used in evaluating salary adjustments for the other
executive officers of the Company, except that the Chief Executive Officer's
performance is evaluated for the prior fiscal year as opposed to the twelve
months immediately preceding his hire date. The Chief Executive Officer's
individual contributions to the Company included his leadership role in
establishing and retaining a strong management team, developing and
implementing the Company's business plans and attracting investment capital to
the Company. In addition, the Compensation Committee reviewed compensation
levels of chief executive officers at comparable companies in the Company's
industry. With the expectation of continuing difficult industry conditions, in
March 1999 the Chief Executive Officer elected to take a 15% salary reduction,
which became effective as of May 1, 1999. As part of the Compensation
Committee's compensation review for the Company's executive officers in
February 2000, the Chief Executive Officer elected to waive any salary
adjustment and asked the Compensation Committee to consider making any
adjustment through the grant of Company stock options. As a result, the
Compensation Committee awarded the Chief Executive Officer 100,000 stock
options in February 2000.
In determining the amount of annual cash bonus compensation to be paid to
the Chief Executive Officer, the Compensation Committee also reviews the
performance of the Chief Executive Officer and the Company for the prior
fiscal year. For such purposes, the Compensation Committee utilizes a four
part formula which the Committee believes provides a quantitative and
qualitative framework to measure the performance of the Chief Executive
Officer and the Company. This formula generally consists of the following
components: (i) the attainment by the Company of certain threshold multiples
of reserve value additions for drilling levels during the
9
<PAGE>
fiscal year; (ii) in the event that certain threshold coverage ratios in (i)
are met, the attainment of budgeted drilling levels by the Company for the
fiscal year; (iii) the number of potential future drilling locations added to
the Company's inventory during the fiscal year; and (iv) a discretionary
component to reward other performance factors that are not easily
quantifiable. In connection with the Company's overhead cost reduction
objectives, the Chief Executive Officer elected to waive any cash bonus
compensation in 1999.
Harold D. Carter
Alexis M. Cranberg
Stephen P. Reynolds
SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
limits (to $1 million per covered executive) the deductibility for federal
income tax purposes of annual compensation paid to a company's chief executive
officer and each of its other four most highly compensated executive officers.
The Company generally seeks to grant options so that they will qualify for an
exemption from the application of Section 162(m) of the Code, thereby
preserving the deductibility for federal income tax purposes of compensation
that may be attributable to the exercise of such options.
EMPLOYMENT AGREEMENTS
The Company employs Ben M. Brigham under an employment agreement (the
"Employment Agreement") as Chief Executive Officer and President of the
Company for a five year term that began in February 1997. The Employment
Agreement contains rollover provisions so that at all times the term of the
Employment Agreement shall be not less than three years. The agreement
provides for an annual salary of $275,000, which the Board of Directors may
further increase from time to time. Mr. Brigham is also entitled to an annual
cash bonus, not to exceed 75% of his then current salary, determined based on
criteria established by the Board of Directors. Under the Employment
Agreement, Mr. Brigham is entitled to participate in any employee benefit
programs that the Company provides to its executive officers. The only
employee benefit programs that the Company offers to its officers and
employees are group insurance coverage, participation in the Company's 401(k)
Retirement Plan, the 1997 Incentive Plan and the Incentive Bonus Plan. If Mr.
Brigham terminates his employment for good reason, which includes a material
reduction of Mr. Brigham's position without cause or his written consent,
breach of a material provision of the Employment Agreement or improper notice
of termination, or if the Company terminates Mr. Brigham without cause, the
Company must pay Mr. Brigham a sum equal to the amount of his annual base
salary that he would have received during the remainder of his employment term
plus the average of his annual bonuses received in the preceding two years
times the number of years in the remainder of his employment term. Mr.
Brigham's agreement also contains a three-year non-compete and confidentiality
clause with standard terms.
On September 20, 1999, the Company entered into Change of Control
Agreements with all of the executive officers of the Company, other than the
CEO. Under the terms of the Change of Control Agreements, in the event that
there is a "Change of Control" (as defined in the Agreement), any options
which would have vested within 5 years of the date of the Change of Control
will immediately vest. Further, under the terms of the Change of Control
Agreements, in the event that there is both a Change of Control and a
"Termination Event" (as defined in the Agreement) prior to the end of the
"Retention Period" (as defined in the Agreement), then in such event the
Company will pay the terminated officer a severance payment equal to two times
the officer's "Annual Base Salary" (as defined in the Agreement).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Members of the Compensation Committee are currently Harold D. Carter,
Alexis M. Cranberg and Stephen P. Reynolds. All determinations concerning
executive compensation for the last fiscal year for the Company's executive
officers were made by the Compensation Committee. The Compensation Committee
members
10
<PAGE>
abstained from participation in compensation determinations concerning their
own compensation. None of the executive officers of the Company has served on
the board of directors or on the compensation committee of any other entity,
any of whose officers served on the Board of Directors of the Company. See
"Certain Transactions" below for certain information regarding relationships
between the Company and entities with whom Mr. Cranberg is affiliated.
Certain Transactions
In connection with land work necessary for certain of the Company's 3-D
exploration, drilling and development operations, the Company engages Brigham
Land Management ("BLM"), an independent company owned and managed by Vincent
M. Brigham, a brother of Ben M. Brigham, who is the Company's Chief Executive
Officer, President and Chairman of the Board, and David T. Brigham, who is a
Vice President of the Company. BLM specializes in conducting the necessary
field land work relating to 3-D seismic exploration activities and to drilling
and development activities. BLM performs these services for the Company using
BLM's employees and independent contractors. In 1999 the Company incurred
costs charged by BLM of approximately $180,000. Other participants in the
Company's 3-D projects reimbursed the Company for a portion of these amounts.
Based on its experience with other firms in the area, the Company believes
that BLM's charges are at or below those of other firms, and in connection
with the Company's reduced land and seismic capital expenditures in 1999, the
amounts paid to BLM in 1999 were significantly lower than in prior years. In
connection with the Company's planned seismic and land capital expenditure
budget for 2000, the Company expects that the amounts paid to BLM in 2000 will
be significantly lower than in 1998 and prior years; however, due to the
Company's expected increase in drilling activity during 2000 and the field
land work that will be necessary related to that drilling activity, the
Company expects that the amounts that the Company will pay to BLM for land
services will increase in 2000, compared to 1999. In September 1999, due to
the Company's capital constraints and its desire to move forward with land
efforts related to a specific project located in Brazoria County, Texas, the
Company entered into agreements with certain land brokers, including BLM,
under which those brokers performed field land work for the Company within the
project pursuant to an arrangement under which the Company had a deferred
election to pay for such brokerage work either in cash or by way of an
overriding royalty in the Company's interest in certain wells that may in the
future be drilled within lands located within the project. Under those
agreements the Company elected not to pay for such services with cash and thus
the consideration for the brokerage services will be paid in the form of an
overriding royalty in the Company's interest in wells, if any, that are
drilled upon the subject lands. In connection with services provided by BLM
under this arrangement, the Company incurred costs charged by BLM of $32,369
in 1999 that will be paid in the form of an approximate 0.81% overriding
royalty interest in the first four net wells drilled by the Company within the
subject lands.
In 1994, the Company, through its subsidiary Quest Resources, L.L.C.,
formed Venture Acquisitions, L.P. ("Venture") with affiliates of RIMCO, a
holder of in excess of 5% of the Common Stock, to provide the Company with the
capital to acquire interests in certain potential drilling locations,
producing properties and 3-D seismic projects. The RIMCO affiliates
contributed $6.8 million to Venture, and the Company contributed $284,087.
Until the first payout under the Venture limited partnership agreement, the
Company's share of all capital costs was 5%, and the Company's share of
revenues and related production expenses and costs was 10%. Between the first
and second payout levels, the Company's share of capital costs and revenues
and related production expenses and costs was 25% and thereafter increased to
50%. Venture acquired from the Company an interest in (i) a 3-D project for
approximately $75,000 in 1995, and (ii) two 3-D delineated potential drilling
locations and 3-D seismic data for approximately $83,000 in 1996. The Company
billed Venture approximately $10,000 in 1999 for its proportionate share of
exploration and overhead costs. Because RIMCO was not an affiliate of the
Company when the Venture partnership was formed, the Company believes that the
terms of the Venture partnership are no less favorable than could be obtained
from an unaffiliated third party. The Venture partnership was dissolved
effective December 31, 1999, and all assets (including cash and real
properties) were distributed to the partners in accordance with their
respective capital accounts. At dissolution, Quest's stipulated share of the
Venture distribution was approximately 12%.
11
<PAGE>
In November 1994, the Company, certain RIMCO affiliates and other unrelated
industry participants entered into a geophysical exploration agreement
creating an area of mutual interest in its Esperson Dome Project in Liberty
and Harris counties, Texas. The Company financed its participation in this
project by assigning its interest, and obligation to bear costs, to Vaquero
Gas Company, Inc. ("Vaquero"), a RIMCO affiliate, subject to a 5% net profits
overriding royalty interest and the right to receive up to 50% of Vaquero's
interest on the occurrence of certain payouts. The Company also retained
responsibility for managing the 3-D seismic data acquisition and
interpretation of the data after it had been acquired. During 1999, the
Company billed approximately $38,000 to the RIMCO affiliates, including
Vaquero, for workstation time and geoscientists' time in interpreting the 3-D
seismic data that were acquired. Because RIMCO was not an affiliate of the
Company when the project was initiated and the interest to Vaquero was
transferred, the Company believes that the terms of the arrangement are no
less favorable than could be obtained from an unaffiliated third party.
In 1999, the Company distributed $10,219 to RIMCO for RIMCO's overriding
royalty interest in certain natural gas and oil properties.
In August 1998, the Company issued $50 million of debt and equity
securities to two affiliates of Enron, Enron N.A. and JEDI II, pursuant to a
securities purchase agreement (the "Purchase Agreement") among the Company,
Enron N.A. and JEDI II. Securities issued by the Company in connection with
this financing transaction included: (i) $40 million of Senior Subordinated
Secured Notes due 2003 (the "Subordinated Notes"), (ii) warrants to purchase
1,000,000 shares of the Company's Common Stock at a price of $10.45 per share
(the "Subordinated Note Warrants") and (iii) 1,052,632 shares of the Company's
Common Stock at a price of $9.50 per share. In 1998, the Company paid Enron
affiliates $1.2 million in interest payments on the Subordinated Notes. In
connection with the closing of the Purchase Agreement, the Company paid an
aggregate of $2.1 million in fees to JEDI II and ECT Securities Corp., an
Enron affiliate. The Company also entered into a registration rights agreement
with Enron N.A. and JEDI II, granting them certain demand registration rights
for two registrations with respect to the shares of the Company's Common Stock
(including shares issuable upon the exercise of the Subordinated Note
Warrants) and the Subordinated Note Warrants, as well as certain "piggyback"
registration rights. The Purchase Agreement also granted Enron N.A. or its
designated affiliate certain rights to designate one member of the Company's
Board of Directors for so long as Enron N.A. and/or JEDI II own 5% or more of
the Company's outstanding Common Stock. According to an amendment dated
January 12, 1999 to a Schedule 13D of the applicable Enron entities, Enron
N.A. contributed its shares of Common Stock of the Company, its Subordinated
Note Warrants and its rights under the Purchase Agreement and the registration
rights agreement to ECT Investments on December 31, 1998. In March 1999, the
Company and the trustee under the indenture governing the Subordinated Notes
entered into an amendment to the indenture. This amendment provided the
Company with the option to pay interest due on the Subordinated Notes in kind,
for any reason, through the second quarter of 2000. In addition, certain
financial and other covenants were amended. The Subordinated Note Warrants
were also amended to provide for a reduction in the exercise price per share
of the Subordinated Note Warrants from $10.45 per share to $3.50 per share. W.
Craig Childers, a former director of the Company who was appointed to the
Board of Directors pursuant to the Purchase Agreement, was a Managing Director
of Enron N.A. in 1998 and 1999.
On February 17, 2000, Brigham entered into a second amendment to the terms
of the indenture. In this amendment, the holders of the Subordinated Notes
agreed to waive the minimum consolidated interest coverage ratio covenant
through June 30, 2000 and to adjust subsequent levels under this test. In
addition, the amendment to the Subordinated Notes provides the Company with an
extension of its right to pay interest through the issuance of additional
Subordinated Notes in lieu of cash (or "in-kind") through the third quarter of
2000 and potentially through the fourth quarter of 2000 if certain conditions
are met. In exchange for granting these amendments, the Company agreed to (i)
reset the price of the Subordinated Note Warrants from an exercise price of
$3.50 per share to $2.43 per share, and (ii) grant to holders of the
Subordinated Notes a term overriding royalty interest that provides for the
limited right to receive 4%, or 3% if certain conditions are met, of the
Company's net production revenue to reduce any outstanding Subordinated Notes
issued as interest paid in-kind.
12
<PAGE>
On March 30, 1999, the Company entered into an agreement (the "Exchange
Agreement") with Veritas DGC Land, Inc. ("Veritas") to exchange 1,002,865
shares of newly issued Common Stock of the Company valued at $3.50 per share
for approximately $3.5 million of payment obligations due to Veritas in 1999
for certain seismic acquisition and processing services previously performed.
In addition, the Exchange Agreement provided for the payment by the Company of
up to $1 million in future seismic processing services to be performed by
Veritas in newly issued shares of the Company's Common Stock valued at $3.50
per share, in the event that the Company elected not to pay for such services
in cash. An aggregate of 119,550 and 89,165 additional shares of newly issued
Common Stock of the Company were exchanged for approximately $419,000 and
$312,000 of payment obligations due to Veritas on July 19, 1999 and August 17,
1999, respectively. In connection with the Exchange Agreement, the Company
also entered into a registration rights agreement with Veritas requiring
registration for the shares of the Company's Common Stock issued pursuant to
the Exchange Agreement, as well as providing certain "piggyback" registration
rights. Pursuant to the Registration Rights Agreement, the 1,211,580 shares
issued to Veritas under the Exchange Agreement were registered in September
1999. Pursuant to certain agreements with Veritas, in 1999 the Company paid
Veritas an aggregate of approximately $940,000 for seismic acquisition and
processing services. Based on its experience with other providers of similar
services, the Company believes that the terms of the service arrangements with
Veritas were no less favorable than could be obtained from an unaffiliated
third party.
Pursuant to a consulting agreement with Harold D. Carter, the Company paid
Mr. Carter $4,000 per month and reimbursed certain of his out-of-pocket
expenses during 1999 for the performance of consulting and advisory services
regarding the operations of the Company. Mr. Carter received $48,000 in 1999.
In addition, pursuant to the terms of Mr. Carter's consulting agreement, the
Company paid Associated Energy Managers, Inc. $1,000 per month in 1999 to
offset a portion of Mr. Carter's office overhead expenses and provide the
Company with limited use of part of Mr. Carter's office space for purposes of
conducting business while employees of the Company are in Dallas, Texas. The
Company is continuing to utilize Mr. Carter's consulting services and is
currently paying Mr. Carter $2,500 per month for such consulting services, as
well as paying Associated Energy Managers, Inc. $1,000 per month for office
space overhead and use.
On February 10, 1999, the Company and Aspect Resources, LLC ("Aspect")
entered into a Joint Development Agreement, under which Aspect has agreed to
pay for 100% of certain land acquisition costs the Company incurs within one
of the Company's South Texas projects prior to February 10, 2001. In return
for funding 100% of such costs, Aspect will be initially assigned 25% of the
oil and gas leasehold interests and 50% of the mineral or royalty interests
which are acquired by the Company with such funds. The Company has an election
to reimburse Aspect for 75% of the costs it funded for the oil and gas
leasehold interests within the time period specified in the Joint Development
Agreement; however, in the event that the Company does not elect to reimburse
Aspect for 75% of such costs, the Company must subsequently assign to Aspect
an additional 25% interest in the leasehold interests acquired. The Company
does not have the option to reimburse Aspect for 75% of the costs incurred to
acquire mineral or royalty interests, as opposed to leasehold interests.
Alexis M. Cranberg, a director of the Company and member of the Audit and
Compensation Committees, is President of Aspect.
In October 1999, the Company entered into an Acquisition and Participation
Agreement with Aspect whereunder Aspect secured anywhere from a 20% undivided
interest to a 50% undivided interest in four of the Company's South Texas
prospects.
On February 26, 1997, the Company entered into a Registration Rights
Agreement with General Atlantic Partners III, L.P., GAP-Brigham Partners,
L.P., RIMCO Partners, L.P. II, RIMCO Partners, L.P. III and RIMCO Partners,
L.P. IV, Ben M. Brigham, Anne L. Brigham, Harold D. Carter, Craig M. Fleming,
David T. Brigham and Jon L. Glass. Pursuant to the Registration Rights
Agreement, Anne and Ben Brigham, acting together, the RIMCO entities, acting
together, and the General Atlantic entities, acting together, each may
separately require the Company to register securities, on one occasion, if the
shares to be registered have an estimated aggregate offering price to the
public of at least $3.0 million. One additional registration is allowed if any
registrable
13
<PAGE>
securities requested to be included in a previous registration statement have
not been disposed of in accordance with that previous registration. The
Registration Rights Agreement also provides "piggyback" registration rights
for all registrations of registrable securities for the Company or another
security holder. In an underwritten offering, however, the Company may exclude
all or a portion of the securities being registered pursuant to "piggyback"
registration rights if the managing underwriter determines that including
those securities would raise a substantial doubt about whether the proposed
offering could be consummated. 1,754,464 of these shares (owned by the RIMCO
entities) were registered in a piggyback transaction in the Veritas
transaction described above. The Registration Rights Agreement contains
customary indemnity by the Company in favor of persons selling securities in a
registration governed by the Registration Rights Agreement, and by those
persons in favor of the Company, relating to the information included in or
omitted from the Registration Statement.
On February 22, 2000, Brigham entered into an agreement to issue 2,195,122
shares of common stock and 731,707 warrants to purchase common stock for total
consideration of $4,512,805 in a private placement to GAP Coinvestment
Partners II, L.P. ("GAP Coinvestment"), Aspect Resources, L.L.C. ("Aspect")
and Special Situations Private Equity Fund, L.P. Stephen P. Reynolds, a
director of the Company and a member of the Audit and Compensation Committees,
is a limited partner of GAP Coinvestment and Alexis M. Cranberg, a director of
the Company and a member of the Audit and Compensation Committees, is the
President of Aspect. The equity sale consisted of the sale of units at a price
of approximately $2.06 per unit. Each unit included one share of common stock
and one-third of a warrant to purchase Brigham common stock at an exercise
price of $2.5625 per share with a three-year term. Pricing of this private
equity placement was based on the average market price of Brigham common stock
during a twenty trading day period prior to issuance. The shares subject to
this transaction must be registered on or before August 20, 2000.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
14
<PAGE>
Performance Graph
The following graph compares the cumulative total stockholder return on the
Common Stock with the cumulative total return of (i) the Media General
Industry Group Index No. 121, "Independent Oil & Gas" ("MG E&P Group Index")
and (ii) the Nasdaq Market Index from the first day of trading of the Common
Stock, May 9, 1997, through December 31, 1999. The graph assumes that the
value of an investment in the Common Stock and each index was $100 at May 9,
1997 and that any dividends were reinvested. Numerical values used for the
year-end plot points in the graph are set forth in the table under the graph.
Comparison of Cumulative Total Return for Brigham Exploration Company,
Nasdaq Market Index and MG E&P Group Index
[Graph]
<TABLE>
<CAPTION>
5/9/97 12/31/97 12/31/98 12/31/99
------ -------- -------- --------
<S> <C> <C> <C> <C>
Brigham Exploration Company................... 100.00 173.33 65.19 18.15
NASDAQ Market Index........................... 100.00 125.21 176.60 311.48
MG E&P Group Index............................ 100.00 99.18 64.24 90.00
</TABLE>
15
<PAGE>
PROPOSAL 2.
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK OF THE COMPANY
GENERAL
Currently the Company's authorized capital consists of 40,000,000 shares of
capital stock, consisting of 10,000,000 shares of Preferred Stock, $.01 par
value ("Preferred Stock") and 30,000,000 shares of Common Stock, $.01 par
value ("Common Stock"). The Board of Directors recommends that the Company's
Certificate of Incorporation be amended to increase the authorized number of
shares of Common Stock by 20,000,000 shares. No increase in the authorized
number of shares of Preferred Stock is recommended.
REASONS AND PRINCIPAL EFFECTS OF THE PROPOSAL
As of the record date, 16,712,908 shares of Common Stock were issued and
outstanding and 10,052,549 shares were reserved for issuance upon conversion
of outstanding warrants and convertible debt or the exercise of outstanding
stock options (including options to purchase 252,692 shares of Common Stock
conditioned upon the approval of Proposal 3). If the proposed increases are
approved, the Company's authorized capital stock will total 60,000,000 shares
of capital stock, consisting of 10,000,000 shares of Preferred Stock and
50,000,000 shares of Common Stock. The Board of Directors considers it in the
best interest of the Company and its stockholders for the stockholders to
adopt the proposed increases. The additional authorized capital stock will be
available for future transactions such as acquisitions of other businesses or
properties, selling stock to raise additional capital, grants under the
Company's 1997 Incentive Plan or other benefit plans, and for other general
corporate purposes. However, the Company currently has no specific plan or
arrangement for the issuance of stock of any class, other than the issuance of
stock of all classes from time to time under the Company's 1997 Incentive Plan
and other benefit plans. Any issuance of stock by the Company will be made in
accordance with applicable law, including the rules of the Nasdaq National
Market and the provisions of our Certificate of Incorporation.
Unless stockholders specify otherwise in the proxy, proxies solicited by
the Board of Directors will be voted by the persons named in the proxy at the
Annual Meeting to amend the Certificate of Incorporation to increase the
number of authorized shares of Common Stock of the Company. The affirmative
vote of a majority of the outstanding Common Stock entitled to vote will be
required for approval. Any abstentions, "broker non-votes" (shares held by
brokers or nominees as to which they have no discretionary authority to vote
on a particular matter and have received no instructions from the beneficial
owners or persons entitled to vote thereon) or other limited proxies will have
the same effect as a vote "against" the proposal to amend the Certificate of
Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK OF THE COMPANY.
PROPOSAL 3.
AMENDMENT TO THE 1997 INCENTIVE PLAN
GENERAL
The 1997 Incentive Plan (the "Plan") was adopted by the Board of Directors
of the Company and approved by the Company's stockholders prior to the initial
public offering of the Company's Common Stock in 1997. Pursuant to a Unanimous
Consent of Directors in lieu of Special Meeting of the Board of Directors of
the Company dated February 1, 2000, the Board of Directors adopted a proposal
to amend the Plan to change the number of shares of Common Stock of the
Company available for issuance under the Plan from 1,588,169 to (a) 13% of the
shares of Common Stock of the Company issued and outstanding at any time,
minus (b) the total number of shares of Common Stock subject to outstanding
awards previously granted to employees under the Plan. Based on the 16,712,908
shares of Common Stock outstanding as of April 20, 2000, the aggregate number
of shares of Common Stock reserved for issuance to employees under the amended
Plan would be 2,172,678 shares, of which 1,840,861 have been granted and
331,817 would remain available for future grants. The proposal to amend the
Plan is subject to stockholder approval.
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<PAGE>
Reasons and Principal Effects of the Proposal
As of December 31, 1999, there were outstanding employee stock options
covering 1,514,526 shares of Common Stock. Additionally, 73,643 shares of
Common Stock remained available for future awards under the Plan. In February
2000, the Company granted stock options covering the balance of the shares
then available under the Plan and also granted conditional stock options to
certain executive officers and employees of the Company. The conditional stock
options awarded February 1, 2000 exceeded the availability on that date under
the Plan by 252,692 shares and such options are expressly made conditional
upon the stockholders' amendment to the Plan to authorize the shares necessary
for those grants. The primary purpose of the proposal is to continue the Plan
by increasing the aggregate number of shares of Common Stock that may be
issued under the Plan, which will allow the Company to attract, retain and
reward key employees who can have a significant effect on the success of the
Company. The Company anticipates that it will desire to issue additional
options or other rights to acquire shares of Common Stock to attract and
retain personnel to facilitate the continued development and expansion of its
business.
Description of the Plan
General. Pursuant to the Plan, participants are eligible to receive awards
consisting of (i) stock options, (ii) stock appreciation rights, (iii) stock,
(iv) restricted stock, (v) cash, (vi) performance awards or (vii) any
combination of the foregoing. Stock options may be either incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or nonqualified stock options.
Participants in the Plan are selected by such committee (the "Committee")
of the Board of Directors as is designated by the Board to administer the 1997
Incentive Plan (currently, the Compensation Committee of the Board of
Directors) from among those who hold positions of responsibility with the
Company or its subsidiaries and whose performance, in the judgment of the
Committee, can have a significant effect on the success of the Company and its
subsidiaries.
Administration. Subject to the provisions of the Plan, the Committee is
authorized to determine the type or types of awards made to each participant
and the terms, conditions and limitations applicable to each award. The
Committee shall review and consider the recommendations of the President of
the Company. In addition, the Committee has the exclusive power to interpret
the Plan and to adopt such rules and regulations as it may deem necessary or
appropriate in keeping with the objectives of the Plan.
Eligibility. Key employees of the Company and its subsidiaries eligible for
awards under the Plan are those who hold positions of responsibility and whose
performance, in the judgment of the Committee, can have a significant effect
on the success of the Company and its subsidiaries. "Subsidiaries" for
purposes of the Plan means those corporations, partnerships, or other business
entities in which the Company directly or indirectly owns 50% or more of the
voting power or, in the case of partnerships or other noncorporate business
entities, capital or profits interests.
Awards. The Plan provides for the grant of any or all of the following
types of awards: (i) stock options, including incentive stock options, (ii)
stock appreciation rights, (iii) stock awards, (iv) restricted stock, (v) cash
awards, or (vi) performance awards. Such awards may be granted singly, in
combination, or in tandem as determined by the Committee. The Committee
determines the terms, conditions, and limitations applicable to awards made
pursuant to the Plan, subject to the following requirements set forth in the
Plan. The price at which shares of Common Stock may be purchased upon the
exercise of any incentive stock option will be not less than the fair market
value of the Common Stock on the date of grant, except that if the participant
owns stock possessing more than 10 percent of the total combined voting power
of all classes of stock of the Company, the price at which shares of Common
Stock may be purchased will not be less than 110 percent of the fair market
value of the Common Stock on the date of grant. The price at which shares of
Common Stock may be purchased upon the exercise of a nonqualified option will
be an amount determined by the Committee, but not less than par value. A
performance award will be paid, vested, or otherwise deliverable solely on
account of the attainment of
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<PAGE>
one or more pre-established objective performance goals established by the
Committee. The maximum number of shares of Common Stock for which options and
stock appreciation rights may be granted under the Plan to any one participant
during a calendar year is 500,000.
Rights to dividends or dividend equivalents may be extended to and made
part of any award consisting of shares of Common Stock or units denominated in
shares of Common Stock, subject to such terms, conditions and restrictions as
the Committee may establish. The Committee also may establish rules and
procedures for the crediting of interest on dividend equivalents for awards
consisting of shares of Common Stock or units denominated in shares of Common
Stock.
Adjustments. In the event of any subdivision or consolidation of
outstanding shares of Common Stock, declaration of a dividend payable in
shares of Common Stock or other stock split, then (i) the number of shares of
Common Stock reserved under the Plan, (ii) the number of shares of Common
Stock covered by outstanding awards in the form of Common Stock or units
denominated in Common Stock, (iii) the exercise or other price in respect of
such awards and (iv) the appropriate fair market value and other price
determinations for such awards will each be proportionately and equitably
adjusted by the Board to reflect such transaction. In the event of any other
recapitalization or capital reorganization of the Company, any consolidation
or merger of the Company with another corporation or entity, the adoption by
the Company of any plan of exchange affecting the Common Stock or any
distribution to holders of Common Stock of securities or property (other than
normal cash dividends or dividends payable in Common Stock), the Board will
make appropriate and equitable adjustments to (i) the number of shares of
Common Stock covered by awards in the form of Common Stock or units
denominated in Common Stock, (ii) the exercise or other price in respect of
such awards and (iii) the appropriate fair market value and other price
determinations for such awards to give effect to such transaction; provided
that such adjustments will only be such as are necessary to maintain the
proportionate interest of the holders of the awards and preserve, without
exceeding, the value of such awards. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation, the Board is authorized to issue or assume awards by means of
substitution of new awards, as appropriate, for previously issued awards or to
assume previously issued awards as part of such adjustment.
Amendment and Termination. The Board may amend, modify, suspend or
terminate the Plan for the purpose of meeting or addressing any changes in
legal requirements or for any other purpose permitted by law, except that no
amendment or alteration that would adversely affect the rights of any
participant under any award previously granted to such participant may be made
without the consent of such participant.
Funding of Plan. Insofar as it provides for awards of cash, Common Stock or
rights thereto, the Plan is unfunded. Although bookkeeping accounts may be
established with respect to participants who are entitled to cash, Common
Stock or rights thereto under the Plan, any such accounts will be used merely
as a bookkeeping convenience. The Company will not be required to segregate
any assets that may at any time be represented by cash, Common Stock or rights
thereto, nor will the Plan be construed as providing for such segregation, nor
shall the Company, the Board, the Committee or any officer or other employee
of the Company be deemed to be a trustee of any cash, Common Stock or rights
thereto to be granted under the Plan. Any liability or obligation of the
Company to any participant with respect to an award of cash, Common Stock or
rights thereto under the Plan will be based solely upon any contractual
obligations that may be created by such plan and any award agreement, and no
such liability or obligation of the Company will be deemed to be secured by
any pledge or other encumbrance on any property of the Company. None of the
Company, the Board, the Committee or any officer or other employee of the
Company will be required to give any security or bond for the performance of
any obligation that may be created by the Plan.
Federal Income Tax Consequences
The following summary relates to U.S. federal income tax consequences only
and applies to U.S. citizens and foreign persons who are U.S. residents for
U.S. federal income tax purposes. The U.S. federal income tax consequences
associated with the grant of awards to nonresident aliens depends upon a
number of factors,
18
<PAGE>
including whether such grant is considered to be U.S. source income and
whether the provisions of any treaty are applicable. The acquisition,
ownership or disposition of an award or shares acquired pursuant to an award
also may have tax consequences under various state and foreign laws which may
be applicable to certain participants. Since these tax consequences, as well
as the federal income tax consequences described above, may vary from
participant to participant depending upon the particular facts and
circumstances involved, each participant should consult such participant's own
tax advisor with respect to the federal income tax consequences of the grant
or exercise of an award, and also with respect to any tax consequences under
applicable state and foreign laws.
The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974 and is not qualified under Section 401(a) of the Code.
Nonqualified Stock Options. No income will be recognized by an optionee for
federal income tax purposes upon the grant of a nonqualified stock option.
Upon exercise of a nonqualified stock option, the optionee will recognize
ordinary income in an amount equal to the excess of the fair market value of
the shares on the date of exercise over the option price of such shares.
Income recognized upon the exercise of nonqualified stock options will be
considered compensation subject to withholding at the time such income is
recognized, and therefore, the Company or one of its affiliates must make the
necessary arrangements with the optionee to ensure that the amount of the tax
required to be withheld is available for payment. Nonqualified stock options
are designed to provide a deduction for the Company (subject to the deduction
limitations described below) equal to the amount of ordinary income recognized
by the optionee at the time of such recognition by the optionee.
The basis of shares transferred to an optionee pursuant to exercise of a
nonqualified stock option is the price paid for such shares plus an amount
equal to any income recognized by the optionee as a result of the exercise of
such option. If an optionee thereafter sells shares acquired upon exercise of
a nonqualified stock option, the optionee will recognize long-term or short-
term capital gain or loss (depending on the optionee's holding period with
respect to such shares) equal to the difference between the amount realized on
such sale and the basis of such shares.
If an optionee uses already owned shares of Common Stock to pay the
exercise price for shares under a nonqualified stock option, the number of
shares received pursuant to the option that is equal to the number of shares
delivered in payment of the exercise price will be considered received in a
nontaxable exchange, and the fair market value of the remaining shares
received by the optionee upon such exercise will be taxable to the optionee as
ordinary income. If the already owned shares of Common Stock are not
"statutory option stock" (which is defined in Section 424(c)(3)(B) of the Code
to include any stock acquired through the exercise of an incentive stock
option or an option granted pursuant to an employee stock purchase plan) or
are statutory option stock with respect to which the applicable holding period
referred to in Section 424(c)(3)(A) of the Code has been satisfied, the shares
received pursuant to the exercise of the option will not be statutory option
stock and the optionee's basis in the number of shares received in exchange
for the shares delivered in payment of the exercise price will be equal to the
basis of the shares delivered in payment. The basis of the remaining shares
received upon such exercise will be equal to the fair market value of the
shares. However, if such already owned shares of Common Stock are statutory
option stock with respect to which the applicable holding period has not been
satisfied, it is not presently clear whether such exercise will be considered
a disqualifying disposition of the statutory option stock, whether the shares
received upon such exercise will be statutory option stock or how the
optionee's basis will be allocated among the shares received.
Incentive Stock Options. No income will be recognized by an optionee for
federal income tax purposes upon the grant or the exercise of an incentive
stock option; provided, however, that to the extent that an incentive stock
option is exercised more than three months (twelve months in the event of
disability) from the date of termination of employment for any reason other
than death, such incentive stock option will be taxed in the same manner
described above for nonqualified stock options (rather than in the manner
described herein for an
19
<PAGE>
incentive stock option). The basis of shares transferred to an optionee
pursuant to the exercise of an incentive stock option is the price paid for
such shares. If the optionee holds such shares for at least one year after
transfer of the shares to the optionee and two years after the grant of the
option, the optionee will recognize long-term or short- term capital gain or
loss (depending on the optionee's holding period with respect to the shares)
upon sale of the shares received upon such exercise equal to the difference
between the amount realized on such sale and the basis of the shares.
Generally, if the shares are not held for that period, the optionee will
recognize ordinary income upon disposition in an amount equal to the excess of
the fair market value of the purchased shares on the date of exercise over the
option price of such shares, or if less (and if the disposition is a
transaction in which loss, if sustained, will be recognized), the gain on
disposition. Any additional gain realized by the optionee upon such
disposition will be a capital gain.
The excess of the fair market value of shares on the date of the exercise
of an incentive stock option over the option price for such shares is an item
of adjustment for purposes of the alternative minimum tax.
The Company is not entitled to a deduction upon the exercise of an
incentive stock option by an optionee. If the optionee disposes of the shares
of stock received pursuant to such exercise prior to the expiration of one
year following transfer of the shares to the optionee or two years after grant
of the option, however, the Company may (subject to the deduction limitations
described below) deduct an amount equal to the ordinary income recognized by
the optionee upon disposition of the shares at the time such income is
recognized by the optionee.
If an optionee uses already owned shares of Common Stock to pay the
exercise price for shares under an incentive stock option, the resulting tax
consequences will depend upon whether the already owned shares of Common Stock
are "statutory option stock", and, if so, whether such statutory option stock
has been held by the optionee for the applicable holding period referred to in
Section 424(c)(3)(A) of the Code. In general, "statutory option stock" (as
defined in Section 424(c)(3)(B) of the Code) is any stock acquired through the
exercise of an incentive stock option or an option granted pursuant to an
employee stock purchase plan. If the stock is statutory option stock with
respect to which the applicable holding period has been satisfied, no income
will be recognized by the optionee upon the transfer of such stock in payment
of the exercise price of an incentive stock option. If the stock is not
statutory option stock, no income will be recognized by the optionee upon the
transfer of the stock unless the stock is not substantially vested within the
meaning of the regulations under Section 83 of the Code (in which event it
appears that the optionee will recognize ordinary income upon the transfer
equal to the amount by which the fair market value of the transferred shares
exceeds their basis). If the stock used to pay the exercise price of an
incentive stock option is statutory option stock with respect to which the
applicable holding period has not been satisfied, the transfer of such stock
will be a disqualifying disposition described in Section 421(b) of the Code
which will result in the recognition of ordinary income by the optionee in an
amount equal to the excess of the fair market value of the statutory option
stock at the time the option covering such stock was exercised over the option
price of such stock. Under the present provisions of the Code, it is not clear
whether all shares received upon the exercise of an incentive stock option
with already owned shares will be statutory option stock or how the optionee's
basis will be allocated among such shares.
Stock Appreciation Rights. A recipient of stock appreciation rights
("SARs") will not recognize income for federal income tax purposes upon the
grant of SARs. Generally, when SARs are exercised, the recipient will
recognize ordinary income subject to withholding on the date of exercise in an
amount equal to the cash (if any) and the fair market value of the shares
transferred to him or her, without limitation, pursuant to SARs. The Company
will be allowed a deduction (subject to the deduction limitations described
below) equal to the amount of ordinary income recognized by the recipient due
to the exercise of SARs at the time of such recognition by the recipient.
The basis of any shares of Common Stock transferred to a recipient pursuant
to the exercise of an SAR is equal to the amount the recipient is required to
include in income as discussed above. If a recipient sells shares acquired
upon exercise of SARs, the recipient will recognize long-term or short-term
capital gain or loss (depending on the recipient's holding period with respect
to such shares) equal to the difference between the amount realized on such
sale and the basis of such shares.
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<PAGE>
Stock Awards and Restricted Stock. If an award of stock is not imposed with
restrictions or if the restrictions imposed upon an award of restricted stock
under the Plan are not of a nature that such shares are both subject to a
substantial risk of forfeiture and not freely transferable, within the meaning
of Section 83 of the Code, the recipient of such an award will recognize
ordinary income for federal income tax purposes at the time of the award in an
amount equal to the fair market value of the shares of restricted stock on the
date of the award, less any amount paid therefor. The Company will be entitled
to a deduction at such time (subject to the deduction limitations described
below) in an amount equal to the amount the recipient is required to include
in income with respect to the shares.
If the restrictions placed upon an award of restricted stock under the Plan
are of a nature that such shares are both subject to a substantial risk of
forfeiture and are not freely transferable within the meaning of Section 83 of
the Code, the recipient of such award will not recognize income for federal
income tax purposes at the time of the award unless such recipient
affirmatively elects to include the fair market value of the shares of
restricted stock on the date of the award, less any amount paid therefor, in
gross income for the year of the award pursuant to Section 83(b) of the Code.
In the absence of such an election, the recipient will be required to include
in income for federal income tax purposes, in the year in which the shares
either become freely transferable or are no longer subject to a substantial
risk of forfeiture within the meaning of Section 83 of the Code, the fair
market value of the shares of restricted stock on such date plus the amount of
any retained distributions related to such shares, less any amount paid
therefor. The Company will be entitled to a deduction at such time (subject to
the deduction limitations described below) in an amount equal to the amount
the recipient is required to include in income with respect to the shares.
If a Section 83(b) election is made within 30 days after the date the
restricted stock is received, the participant will recognize an amount of
ordinary income at the time of the receipt of the restricted stock and the
Company will be entitled to a corresponding deduction (subject to the
deduction limitations described below) equal to the fair market value
(determined without regard to applicable restrictions) of the shares at such
time less the amount paid, if any, by the participant for the restricted
stock. If a Section 83(b) election is made, no additional income will be
recognized by the participant upon the lapse of restrictions on the restricted
stock, but, if the restricted stock is subsequently forfeited, the participant
may not deduct the income that was recognized pursuant to the Section 83(b)
election at the time of the receipt of the restricted stock. Dividends paid to
a participant holding restricted stock before the expiration of the
restriction period will be additional compensation taxable as ordinary income
to the participant, unless the participant made an election under Section
83(b). If the participant has made a Section 83(b) election, the dividends
will be dividend income, rather than additional compensation, to the
participant. Subject to the deduction limitations described below, the Company
generally will be entitled to a corresponding tax deduction equal to the
dividends includable in the participant's income as compensation.
Cash Awards. An individual who receives a cash award will recognize
ordinary income subject to withholding for federal income tax purposes at the
time the cash is received (or, if earlier, the date the cash is made available
to the individual). The Company will be entitled to a deduction for the amount
of the cash award at such time, subject to the deduction limitations described
below.
Dividend Equivalents. There will be no federal income tax consequences to
either the participant or the Company upon the grant of dividend equivalents.
Generally, unless dividend equivalents are restricted in a manner that they
are both subject to a substantial risk of forfeiture and are not freely
transferable, the participant will recognize ordinary income upon the receipt
of payment pursuant to dividend equivalents in an amount equal to the fair
market value of the Common Stock and the aggregate amount of cash received.
Subject to the deduction limitations described below, the Company generally
will be entitled to a corresponding tax deduction equal to the amount
includable in the participant's income. If dividend equivalents are restricted
in a manner that they are both subject to a substantial risk of forfeiture and
are not freely transferable, the participant's and the Company's tax
consequences will be similar to the rules described above for restricted
stock.
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Limitations on the Company's Compensation Deduction. Section 162(m) of the
Code limits the deduction that the Company may take for otherwise deductible
compensation payable to certain executive officers of the Company to the
extent that compensation paid to such officers for such year exceeds $1
million, unless such compensation is performance-based, is approved by the
Company's stockholders and meets certain other criteria. There is no assurance
that awards made under the Plan will satisfy such requirements. Accordingly,
the Company may be limited by Section 162(m) of the Code in the amount of
deductions it would otherwise be entitled to take (as described in the
foregoing summary) with respect to such awards. The Section 162(m) limitation
does not apply to compensation paid pursuant to a compensation plan that
existed during the period when the corporation was not publicly held, such as
the Plan, so long as the prospectus accompanying the initial public offering
disclosed information concerning the plan in satisfaction of applicable
securities law. This exemption may be relied upon until the earliest of (i)
the expiration of the plan or agreement; (ii) the material modification of the
plan or agreement; (iii) the issuance of all employer stock and other
compensation that has been allocated under the plan; or (iv) the first meeting
of stockholders at which directors are to be elected that occurs after the
close of the third calendar year following the calendar year in which the
initial public offering occurs.
Section 280G of the Code limits the deductibility of certain "parachute
payments" to disqualified individuals by the Company. Generally, "parachute
payments" consist of payments in the nature of compensation made in connection
with a change in control of the Company. It is possible that any accelerated
vesting or payment of awards that occurs automatically upon a change in
control of the Company could be a "parachute payment" subject to the deduction
limitations of Section 280G of the Code. In addition, Section 4999 of the Code
imposes a 20% nondeductible excise tax upon the disqualified individual
receiving certain "parachute payments".
Plan Benefits Pursuant to Amendment
On February 1, 2000, the Compensation Committee awarded stock options to
purchase 340,000 shares of Common Stock to certain executive officers and
employees of the Company, which consisted of options to purchase 87,308 shares
that remained available under the Plan and options to purchase 252,692 shares
that are conditioned upon the proposed amendment to the Plan. The options have
a six-year term with 20% vesting annually on their anniversary date over the
next five years. The options are designed to provide the Company a tax
deduction equal to the amount of ordinary income recognized by the optionee.
The options were granted with an exercise price of $1.83 per share, the last
reported sale price of the Common Stock on the date the options were granted.
As of March 31, 2000, the market value of the Common Stock underlying the
options was $2.25, the last reported sale price of the Common Stock on that
day.
If the fair market value of the 252,692 shares underlying the new
conditional option grants on the date the stockholders approve the amendment
to the Plan (if such amendment is approved) is greater than the exercise price
of the options granted, the grants will result in a direct compensation
expense to the Company in an amount equal to the excess of such fair market
value over the exercise price.
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The following table sets forth plan benefits awarded by the Compensation
Committee pursuant to the amendment to (i) the named executive officers, (ii)
all current executive officers as a group, (iii) all current directors who are
not executive officers as a group and (iv) all employees, excluding all
executive officers.
Plan Benefits Pursuant to Amendment
1997 Incentive Plan
<TABLE>
<CAPTION>
Number
Name of Options
---- ----------
<S> <C>
Named Executive Officers
Ben M. Brigham.................................................. 100,000
Curtis F. Harrell............................................... 12,692
Karen E. Lynch.................................................. 20,000
David T. Brigham................................................ 20,000
A. Lance Langford............................................... 20,000
Executive Officers as a Group..................................... 252,692
Directors Who are Not Executive Officers.......................... --
All Employees, Excluding Executive Officers....................... --
</TABLE>
Unless stockholders specify otherwise in the proxy, proxies solicited by
the Board of Directors will be voted by the persons named in the proxy at the
Annual Meeting for the amendment to the 1997 Incentive Plan. The affirmative
vote of a majority of the votes cast at the Annual Meeting will be required
for approval. Thus, any abstentions, "broker non-votes" (shares held by
brokers or nominees as to which they have no discretionary authority to vote
on a particular matter and have received no instructions from the beneficial
owners or persons entitled to vote thereon) or other limited proxies will have
no effect on the proposal to amend the 1997 Incentive Plan.
The Board of Directors recommends that stockholders vote FOR the proposal
to amend the Plan.
PROPOSAL 4.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed, and recommends the approval of the
appointment of, PricewaterhouseCoopers LLP as independent auditors for the
year ending December 31, 2000. PricewaterhouseCoopers LLP has been the
Company's auditors since 1992. Representatives of PricewaterhouseCoopers LLP
are expected to be present at the Annual Meeting and will be given the
opportunity to make a statement, if they desire to do so, and to respond to
appropriate questions.
Unless stockholders specify otherwise in the proxy, proxies solicited by
the Board of Directors will be voted by the persons named in the proxy at the
Annual Meeting to ratify the selection of PricewaterhouseCoopers LLP as the
Company's auditors for 2000. The affirmative vote of a majority of the votes
cast at the Annual Meeting will be required for ratification. Thus, any
abstentions, "broker non-votes" (shares held by brokers or nominees as to
which they have no discretionary authority to vote on a particular matter and
have received no instructions from the beneficial owners or persons entitled
to vote thereon) or other limited proxies will have no effect on the
ratification of the Company's auditors.
The Board of Directors recommends that stockholders vote FOR the
ratification of the appointment of PricewaterhouseCoopers LLP.
Other Matters
The Board of Directors of the Company does not intend to present any other
matters at the meeting and knows of no other matters which will be presented.
However, if any other matters come before the meeting, it is the intention of
the persons named in the enclosed proxy to vote in accordance with their
judgment on such matters.
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<PAGE>
STOCKHOLDER PROPOSALS
It is contemplated that the Annual Meeting of Stockholders of the Company
in 2001 will take place during the second week of May 2001. Stockholder
proposals for inclusion in the Company's proxy materials for the Annual
Meeting of Stockholders in 2001 must be received at the Company's principal
executive office in Austin, Texas, addressed to the Secretary of the Company,
not later than December 20, 2000.
With respect to stockholder proposals which are not intended to be included
in the Company's proxy materials, the bylaws of the Company provide that
notice of any such stockholder proposal nominating persons for election to the
Board of Directors of the Company must be received at the Company's principal
executive office not later than 90 days prior to the annual meeting; and all
other stockholder proposals must be received not less than 60 nor more than
120 days prior to the meeting.
FORM 10-K ANNUAL REPORT
The Company will provide without charge to each person from whom a proxy is
solicited by this proxy statement, upon the written request of any such
person, a copy of the Company's annual report on Form 10-K, including the
financial statements and the schedules thereto, required to be filed with the
Securities and Exchange Commission pursuant to Section 13(a)-1 under the 1934
Act for the Company's most recent fiscal year. Requests should be directed to
Investor Relations, Brigham Exploration Company, 6300 Bridge Point Parkway,
Building Two, Suite 500, Austin, Texas 78730.
By Order of the Board of Directors
[SIGNATURE APPEARS HERE]
David T. Brigham
Secretary
April 20, 2000
Austin, Texas
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<PAGE>
1997 INCENTIVE PLAN
OF
BRIGHAM EXPLORATION COMPANY
(AS AMENDED FEBRUARY 1, 2000)
1. Plan. This 1997 Incentive Plan of Brigham Exploration Company (the
"Plan") was adopted by the Board of Directors of Brigham Exploration Company
(the "Company") to reward certain key employees of the Company and its
consolidated subsidiaries by enabling them to acquire shares of Common Stock,
par value $.01 per share, of the Company and/or to be compensated for
individual performances.
2. Objectives. The Plan is designed to attract and retain key employees of
the Company and its Subsidiaries (as hereinafter defined), to encourage the
sense of proprietorship of such employees and to stimulate the active interest
of such persons in the development and financial success of the Company and
its Subsidiaries. These objectives are to be accomplished by making Awards (as
hereinafter defined) under this Plan and thereby providing Participants (as
hereinafter defined) with a proprietary interest in the growth and performance
of the Company and its Subsidiaries.
3. Definitions. As used herein, the terms set forth below shall have the
following respective meanings:
"Authorized Officer" means the Chairman of the Board or the Chief Executive
Officer of the Company (or any other senior officer of the Company to whom
either of them shall delegate the authority to execute any Award Agreement).
"Award" means the grant of any Option, SAR, Stock Award, Cash Award or
Performance Award, whether granted singly, in combination or in tandem, to a
Participant pursuant to such applicable terms, conditions and limitations as
the Committee may establish in order to fulfill the objectives of the Plan.
"Award Agreement" means a written agreement between the Company and a
Participant setting forth the terms, conditions and limitations applicable to
an Award.
"Board" means the Board of Directors of the Company.
"Cash Award" means an award denominated in cash.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means such committee of the Board as is designated by the Board
to administer the Plan.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Company" means Brigham Exploration Company, a Delaware corporation.
"Dividend Equivalents" means, with respect to shares of Restricted Stock
that are to be issued at the end of the Restriction Period, an amount equal to
all dividends and other distributions (or the economic equivalent thereof)
that are payable to stockholders of record during the Restriction Period on a
like number of shares of Common Stock.
"Effective Date" has the meaning set forth in paragraph 18 hereof.
"Employee" means an employee of the Company or any of its Subsidiaries.
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<PAGE>
"Fair Market Value" of a share of Common Stock means, as of a particular
date, (i) if shares of Common Stock are listed on a national securities
exchange, the mean between the highest and lowest sales price per share of
Common Stock on the consolidated transaction reporting system for the
principal national securities exchange on which shares of Common Stock are
listed on that date, or, if there shall have been no such sale so reported on
that date, on the last preceding date on which such a sale was so reported,
(ii) if shares of Common Stock are not so listed but are quoted on the Nasdaq
National Market, the mean between the highest and lowest sales price per share
of Common Stock reported by the Nasdaq National Market on that date, or, if
there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported, (iii) if the Common Stock
is not so listed or quoted, the mean between the closing bid and asked price
on that date, or, if there are no quotations available for such date, on the
last preceding date on which such quotations shall be available, as reported
by the Nasdaq National Market, or, if not reported by the Nasdaq National
Market, by the National Quotation Bureau Incorporated or (iv) if shares of
Common Stock are not publicly traded, the most recent value determined in good
faith by the Committee for such purpose.
"Incentive Option" means an Option that is intended to comply with the
requirements set forth in Section 422 of the Code.
"Nonqualified Stock Option" means an Option that is not an Incentive
Option.
"Option" means a right to purchase a specified number of shares of Common
Stock at a specified price.
"Participant" means an Employee to whom an Award has been made under this
Plan.
"Performance Award" means an award made pursuant to this Plan to a
Participant that is subject to the attainment of one or more Performance
Goals.
"Performance Goal" means a standard established by the Committee to
determine in whole or in part whether a Performance Award shall be earned.
"Restricted Stock" means any Common Stock that is restricted or subject to
forfeiture provisions.
"Restriction Period" means a period of time beginning as of the date upon
which an Award of Restricted Stock is made pursuant to this Plan and ending as
of the date upon which the Common Stock subject to such Award is no longer
restricted or subject to forfeiture provisions.
"SAR" means a right to receive a payment, in cash or Common Stock, equal to
the excess of the Fair Market Value or other specified valuation of a
specified number of shares of Common Stock on the date the right is exercised
over a specified strike price, in each case, as determined by the Committee.
"Stock Award" means an award in the form of shares of Common Stock or units
denominated in shares of Common Stock.
"Subsidiary" means (i) in the case of a corporation, any corporation in
which the Company directly or indirectly owns shares representing more than
50% of the combined voting power of the shares of all classes or series of
capital stock of such corporation which have the right to vote generally on
matters submitted to a vote of the stockholders of such corporation and (ii)
in the case of a partnership or other business entity not organized as a
corporation, any such business entity of which the Company directly or
indirectly owns more than 50% of the voting, capital or profits interests
(whether in the form of partnership interests, membership interests or
otherwise).
4. Eligibility. Key Employees eligible for Awards under this Plan are those
who hold positions of responsibility and whose performance, in the judgment of
the Committee, can have a significant effect on the success of the Company and
its Subsidiaries.
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<PAGE>
5. Common Stock Available for Awards. Subject to the provisions of
paragraph 14 hereof, there shall be available for Awards under this Plan
granted wholly or partly in Common Stock (including rights or options that may
be exercised for or settled in Common Stock) an aggregate number of shares of
Common Stock equal to (a) thirteen percent of the total number of shares of
Common Stock outstanding from time to time, minus (b) the total number of
shares of Common Stock subject to outstanding Awards previously granted to
employees of the Company under the Plan. The number of shares of Common Stock
that are the subject of Awards under this Plan, that are forfeited or
terminated, expire unexercised, are settled in cash in lieu of Common Stock or
in a manner such that all or some of the shares covered by an Award are not
issued to a Participant or are exchanged for Awards that do not involve Common
Stock, shall again immediately become available for Awards hereunder. The
Committee may from time to time adopt and observe such procedures concerning
the counting of shares against the Plan maximum as it may deem appropriate.
The Board and the appropriate officers of the Company shall from time to time
take whatever actions are necessary to file any required documents with
governmental authorities, stock exchanges and transaction reporting systems to
ensure that shares of Common Stock are available for issuance pursuant to
Awards.
6. Administration.
(a) This Plan shall be administered by the Committee.
(b) Subject to the provisions hereof, the Committee shall have full and
exclusive power and authority to administer this Plan and to take all actions
that are specifically contemplated hereby or are necessary or appropriate in
connection with the administration hereof. The Committee shall also have full
and exclusive power to interpret this Plan and to adopt such rules,
regulations and guidelines for carrying out this Plan as it may deem necessary
or proper, all of which powers shall be exercised in the best interests of the
Company and in keeping with the objectives of this Plan. The Committee may, in
its discretion, provide for the extension of the exercisability of an Award,
accelerate the vesting or exercisability of an Award, eliminate or make less
restrictive any restrictions contained in an Award, waive any restrictions or
other provision of this Plan or an Award or otherwise amend or modify an Award
in any manner that is either (i) not adverse to the Participant to whom such
Award was granted or (ii) consented to by such Participant. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in
this Plan or in any Award in the manner and to the extent the Committee deems
necessary or desirable to further the Plan purposes. Any decision of the
Committee in the interpretation and administration of this Plan shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned.
(c) No member of the Committee or officer of the Company shall be liable
for anything done by him or her, by any member of the Committee or by any
officer of the Company in connection with the performance of any duties under
this Plan, except for his or her own willful misconduct or as expressly
provided by statute.
7. Delegation of Authority. The Committee may delegate to the Chief
Executive Officer and to other senior officers of the Company its duties under
this Plan pursuant to such conditions or limitations as the Committee may
establish.
8. Awards. The Committee shall determine the type or types of Awards to be
made under this Plan and shall designate from time to time the Employees who
are to be the recipients of such Awards. The Committee shall review and
consider the recommendations of the President of the Company as to such
Awards. Awards shall become effective only upon and after approval by the
Committee. Each Award may be embodied in an Award Agreement, which shall
contain such terms, conditions and limitations as shall be determined by the
Committee in its sole discretion and shall be signed by the Participant to
whom the Award is made and by an Authorized Officer for and on behalf of the
Company. Awards may consist of those listed in this paragraph 8 hereof and may
be granted singly, in combination or in tandem. Awards may also be made in
combination or in tandem with, in replacement of, or as alternatives to,
grants or rights under this Plan or any other employee plan of the Company or
any of its Subsidiaries, including the plan of any acquired entity. Any
provision of this Plan to the contrary notwithstanding, the maximum number of
shares of Common Stock for which Options and SARs may be granted under the
Plan to any one Employee during a calendar year is 500,000. An Award may
provide for the grant or issuance of additional, replacement or alternative
Awards upon the occurrence of specified events,
3
<PAGE>
including the exercise of the original Award granted to a Participant. All or
part of an Award may be subject to conditions established by the Committee,
which may include, but are not limited to, continuous service with the Company
and its Subsidiaries, achievement of specific business objectives, increases
in specified indices, attainment of specified growth rates and other
comparable measurements of performance. Upon the termination of employment by
a Participant, any unexercised, deferred, unvested or unpaid Awards shall be
treated as set forth in the applicable Award Agreement.
(a) Stock Option. An Award may be in the form of an Option. An Option
awarded pursuant to this Plan may consist of an Incentive Option or a
Nonqualified Option. The price at which shares of Common Stock may be
purchased upon the exercise of any Incentive Option shall be not less than the
Fair Market Value of the Common Stock on the date of grant, except that with
respect to Incentive Options granted to any Participant who at the time of
such grant owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company, the exercise price shall
be not less than 110 percent of the Fair Market Value of the Common Stock on
the date of grant and such Incentive Option must not be exercisable after the
expiration of five years from the date such option is granted. The price at
which shares of Common Stock may be purchased upon the exercise of a
Nonqualified Option shall be such amount as shall be determined by the
Committee, but not less than the par value of the Common Stock on the date of
grant. The maximum number of shares of Common Stock with respect to which any
Option may be granted to an Employee hereunder is the number of shares
available for Awards, pursuant to paragraph 5 hereof, at the time such Option
is granted. Subject to the foregoing provisions, the terms, conditions and
limitations applicable to any Options awarded pursuant to this Plan, including
the term of any Options and the date or dates upon which they become
exercisable, shall be determined by the Committee.
(b) Stock Appreciation Right. An Award may be in the form of an SAR. The
terms, conditions and limitations applicable to any SARs awarded pursuant to
this Plan, including the term of any SARs and the date or dates upon which
they become exercisable, shall be determined by the Committee.
(c) Stock Award. An Award may be in the form of a Stock Award. The terms,
conditions and limitations applicable to any Stock Awards granted pursuant to
this Plan shall be determined by the Committee.
(d) Cash Award. An Award may be in the form of a Cash Award. The terms,
conditions and limitations applicable to any Cash Awards granted pursuant to
this Plan shall be determined by the Committee.
(e) Performance Award. Without limiting the type or number of Awards that
may be made under the other provisions of this Plan, an Award may be in the
form of a Performance Award. A Performance Award shall be paid, vested or
otherwise deliverable solely on account of the attainment of one or more pre-
established, objective Performance Goals established by the Committee.
9. Payment of Awards.
(a) General. Payment of Awards may be made in the form of cash or Common
Stock, or a combination thereof, and may include such restrictions as the
Committee shall determine, including, in the case of Common Stock,
restrictions on transfer and forfeiture provisions. If payment of an Award is
made in the form of Restricted Stock, the Award Agreement relating to such
shares shall specify whether they are to be issued at the beginning or end of
the Restriction Period. In the event that shares of Restricted Stock are to be
issued at the beginning of the Restriction Period, the certificates evidencing
such shares (to the extent that such shares are so evidenced) shall contain
appropriate legends and restrictions that describe the terms and conditions of
the restrictions applicable thereto. In the event that shares of Restricted
Stock are to be issued at the end of the Restriction Period, the right to
receive such shares shall be evidenced by book entry registration or in such
other manner as the Committee may determine.
(b) Dividends and Interest. Rights to dividends or Dividend Equivalents may
be extended to and made part of any Award consisting of shares of Common Stock
or units denominated in shares of Common Stock, subject to such terms,
conditions and restrictions as the Committee may establish. The Committee may
also establish rules and procedures for the crediting of interest on deferred
cash payments and Dividend Equivalents for Awards consisting of shares of
Common Stock or units denominated in shares of Common Stock.
4
<PAGE>
(c) Substitution of Awards. At the discretion of the Committee, a
Participant may be offered an election to substitute an Award for another
Award or Awards of the same or different type.
10. Stock Option Exercise. The price at which shares of Common Stock may be
purchased under an Option shall be paid in full at the time of exercise in
cash or, if elected by the optionee and to the extent permitted by the
optionee's Award Agreement, the optionee may purchase such shares by means of
tendering Common Stock or surrendering another Award, including Restricted
Stock, valued at Fair Market Value on the date of exercise, or any combination
thereof. The Committee shall determine acceptable methods for Participants to
tender Common Stock or other Awards. The Committee may provide for procedures
to permit the exercise or purchase of such Awards by use of the proceeds to be
received from the sale of Common Stock issuable pursuant to an Award. Unless
otherwise provided in the applicable Award Agreement, in the event shares of
Restricted Stock are tendered as consideration for the exercise of an Option,
a number of the shares issued upon the exercise of the Option, equal to the
number of shares of Restricted Stock used as consideration therefor, shall be
subject to the same restrictions as the Restricted Stock so submitted as well
as any additional restrictions that may be imposed by the Committee. In
addition, the Committee, at its sole discretion, may provide for loans, on
either a short-term or demand basis, from the Company to a Participant to
permit the payment of the exercise price of an Option.
11. Tax Withholding. The Company shall have the right to deduct applicable
taxes from any Award payment and withhold, at the time of delivery or vesting
of cash or shares of Common Stock under this Plan, an appropriate amount of
cash or number of shares of Common Stock or a combination thereof for payment
of taxes required by law or to take such other action as may be necessary in
the opinion of the Company to satisfy all obligations for withholding of such
taxes, including, withholding from other amounts payable to or with respect to
the Participant by the Company. The Committee may also permit withholding to
be satisfied by the transfer to the Company of shares of Common Stock
theretofore owned by the holder of the Award with respect to which withholding
is required. If shares of Common Stock are used to satisfy tax withholding,
such shares shall be valued based on the Fair Market Value when the tax
withholding is required to be made. The Committee may provide for loans, on
either a short-term or demand basis, from the Company to a Participant to
permit the payment of taxes required by law.
12. Amendment, Modification, Suspension or Termination. The Board may
amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose
permitted by law, except that no amendment or alteration that would adversely
affect the rights of any Participant under any Award previously granted to
such Participant shall be made without the consent of such Participant.
13. Assignability. The Committee may prescribe and include in applicable
Award Agreements restrictions on transfer. Any attempted assignment of an
Award or any other benefit under this Plan in violation of the terms in an
Award Agreement pursuant to this paragraph 13 shall be null and void.
14. Adjustments.
(a) The existence of outstanding Awards shall not affect in any manner the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
capital stock of the Company or its business or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock (whether or not such issue is prior to, on a parity with or junior to
the Common Stock) or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding of any kind, whether or not of a character similar
to that of the acts or proceedings enumerated above.
(b) In the event of any subdivision or consolidation of outstanding shares
of Common Stock, declaration of a dividend payable in shares of Common Stock
or other stock split, then (i) the number of shares of Common Stock reserved
under this Plan, (ii) the number of shares of Common Stock covered by
outstanding Awards in the form of Common Stock or units denominated in Common
Stock, (iii) the exercise or other price in respect of
5
<PAGE>
such Awards and (iv) the appropriate Fair Market Value and other price
determinations for such Awards shall each be proportionately and equitably
adjusted by the Board to reflect such transaction. In the event of any other
recapitalization or capital reorganization of the Company, any consolidation
or merger of the Company with another corporation or entity, the adoption by
the Company of any plan of exchange affecting the Common Stock or any
distribution to holders of Common Stock of securities or property (other than
normal cash dividends or dividends payable in Common Stock), the Board shall
make appropriate and equatable adjustments to (i) the number of shares of
Common Stock covered by Awards in the form of Common Stock or units
denominated in Common Stock, (ii) the exercise or other price in respect of
such Awards and (iii) the appropriate Fair Market Value and other price
determinations for such Awards, to give effect to such transaction; provided
that such adjustments shall only be such as are necessary to maintain the
proportionate interest of the holders of the Awards and preserve, without
exceeding, the value of such Awards. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation, the Board shall be authorized to issue or assume Awards by means
of substitution of new Awards, as appropriate, for previously issued Awards or
to assume previously issued Awards as part of such adjustment.
15. Restrictions. No Common Stock or other form of payment shall be issued
with respect to any Award unless the Company shall be satisfied based on the
advice of its counsel that such issuance will be in compliance with applicable
federal and state securities laws. Certificates evidencing shares of Common
Stock delivered under this Plan (to the extent that such shares are so
evidenced) may be subject to such stop transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any securities
exchange or transaction reporting system upon which the Common Stock is then
listed or to which it is admitted for quotation and any applicable federal or
state securities law. The Committee may cause a legend or legends to be placed
upon such certificates (if any) to make appropriate reference to such
restrictions.
16. Unfunded Plan. Insofar as it provides for Awards of cash, Common Stock
or rights thereto, this Plan shall be unfunded. Although bookkeeping accounts
may be established with respect to Participants who are entitled to cash,
Common Stock or rights thereto under this Plan, any such accounts shall be
used merely as a bookkeeping convenience. The Company shall not be required to
segregate any assets that may at any time be represented by cash, Common Stock
or rights thereto, nor shall this Plan be construed as providing for such
segregation, nor shall the Company, the Board, the Committee or any officer or
other employee of the Company be deemed to be a trustee of any cash, Common
Stock or rights thereto to be granted under this Plan. Any liability or
obligation of the Company to any Participant with respect to an Award of cash,
Common Stock or rights thereto under this Plan shall be based solely upon any
contractual obligations that may be created by this Plan and any Award
Agreement, and no such liability or obligation of the Company shall be deemed
to be secured by any pledge or other encumbrance on any property of the
Company. None of the Company, the Board, the Committee or any other officer or
other employee of the Company shall be required to give any security or bond
for the performance of any obligation that may be created by this Plan.
17. Governing Law. This Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by mandatory provisions
of the Code or the securities laws of the United States, shall be governed by
and construed in accordance with the laws of the State of Delaware.
18. Effectiveness. This Plan, as amended, shall be effective as of February
1, 2000, (the "Effective Date"), the date on which it was approved by the
Board of Directors of the Company. Notwithstanding the foregoing, the ability
of the Company to issue any Incentive Options under this Plan, as amended, is
expressly conditioned upon the approval of the Plan, as amended, by the
holders of a majority of shares of Common Stock before the first anniversary
of the Effective Date. If the Stockholders of the Company should fail to so
approve this Plan, as amended, prior to such date, the Company's ability to
issue Incentive Options under this Plan, as amended, shall terminate and cease
to be of any further force or effect and any and all grants of Incentive
Options made conditional upon the approval of the amendment to the Plan shall
be null and void.
6
<PAGE>
BRIGHAM EXPLORATION COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
May 18, 2000
The undersigned hereby appoints Ben M. Brigham and David T. Brigham, or
any of them, each with full power of substitution, to represent the undersigned
at the Annual Meeting of Stockholders of Brigham Exploration Company to be held
at 1:00 p.m. C.S.T. on May 18, 2000, at the Company's corporate offices, 6300
Bridgepoint Parkway, Bldg. Two, Suite 500, Austin, Texas, and at any
adjournments or postponements thereof, and to vote the number of shares the
undersigned would be entitled to vote if personally present at the meeting.
The Board of Directors recommends that you vote FOR the election of all nominees
for election to the Board of Directors and FOR Proposals 2, 3 and 4.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF BRIGHAM
EXPLORATION COMPANY. THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF
DIRECTION, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR ELECTION AND FOR
PROPOSALS 2, 3 AND 4. In their discretion, the proxy holders are authorized to
vote upon such other business as may properly come before the meeting or any
adjournment thereof to the extent authorized by Rule 14a-4(c) promulgated by the
Securities and Exchange Commission and by applicable state laws.
(Continued, and to be marked, dated and signed, on the other side)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
BRIGHAM EXPLORATION COMPANY
May 18, 2000
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
Please mark your
[X] votes as in this
example.
FOR WITHHOLD
all nominees listed AUTHORITY Nominees:
(except as indicated to vote for all Ben M. Brigham
to the contrary) nominees listed Anne L. Brigham
Harold D. Carter
1. ELECTION OF [_] [_] Alexis M. Cranberg
DIRECTORS. Curtis F. Harrell
Stephen P. Reynolds
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
the nominee's name on the space provided below.)
- --------------------------------------------------
FOR AGAINST ABSTAIN
2. AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER [_] [_] [_]
OF AUTHORIZED SHARES OF COMMON STOCK.
3. AMENDMENT TO THE 1997 INCENTIVE PLAN
TO CHANGE THE NUMBER OF SHARES OF [_] [_] [_]
COMMON STOCK AVAILABLE FOR ISSUANCE
THEREUNDER.
4. RATIFICATION OF PRICEWATERHOUSECOOPERS
LLP AS THE COMPANY'S AUDITORS FOR THE [_] [_] [_]
FISCAL YEAR ENDING DECEMBER 31, 2000.
5. The transaction of such other business as may properly come before the
meeting or any adjournments or postponements of the meeting.
Whether or not you plan to attend the meeting in person, you are urged to
complete, date, sign and promptly mail this proxy in the enclosed return
envelope so that your shares may be represented at the meeting.
Signature
----------------------------------- --------------------------------
Signature (if held jointly)
Dated: , 2000
------------------
NOTE: Please sign exactly as your name(s) appear(s) on your stock certificate.
If shares of stock stand of record in the names of two or more persons or
in the name of husband and wife, whether as joint tenants or otherwise,
both or all of such persons should sign the proxy. If shares of stock are
held of record by a corporation, the proxy should be executed by the
president or vice president and the secretary or assistant secretary.
Executors, administrators or other fiduciaries who execute the above proxy
for a stockholder should give their full title. Please date the proxy.
