<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from _____________ to _____________
Commission File Number 0-14334
VENUS EXPLORATION, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-3299127
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1250 N.E. Loop 410, Suite 1000, San Antonio, Texas 78209
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (210) 930-4900
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of class)
------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months, and (2) has been subject to such
filing requirements for the past ninety (90) days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. [X]
The value of shares of Common Stock held by non-affiliates of the
Registrant (all directors, officers and holders of five percent or more of the
Common Stock of the Company are presumed to be affiliates for purposes of this
calculation), computed by reference to the closing bid price of such stock on
April 12, 1999, was approximately $3,703,929. As of April 12, 1999, the
Registrant had outstanding 10,982,365 shares of Common Stock.
<PAGE> 2
The undersigned Registrant hereby amends its Annual Report on Form 10-K
for the year ended December 31, 1998, to include the information called for by
the following items, as set forth in the pages attached hereto:
Part III. Item 10. Directors and Executive Officers of the
Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Item 13. Certain Relationships and Related Transactions
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
VENUS EXPLORATION, INC.
By: /s/ JOHN Y. AMES
---------------------------
April 30, 1999 John Y. Ames
President, Chief Operating Officer
AMENDMENT NO. 1 TO
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998
Because definitive proxy soliciting materials relating to the 1999
Annual Meeting of Stockholders of Venus Exploration, Inc. ("Venus" or the
"Company") will be filed after April 30, 1999, the information called for by
Part III of the Company's Form 10-K for the year ended December 31, 1998 is
included in this Amendment No. 1 to such Form 10-K.
PART III OF FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1998
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS OF THE COMPANY
There are seven directors of the Company, each holding office until the
next Annual Meeting of Stockholders and until his successor is elected and
qualified, or as otherwise provided by the Company's Bylaws or by Delaware law.
Each of the directors was elected at the 1998 Annual Meeting of Stockholders. Of
the directors listed below, Messrs. Eugene L. Ames, Jr., John Y. Ames, James W.
Gorman, and Jere W. McKenny were the designees of New Venus (defined below)
under terms of the acquisition agreement and the stockholders agreement relating
to the purchase of The New Venus Exploration, Inc. ("New Venus") by the Company
(then known as Xplor Corporation) in May 1997. Messrs. Bell and Davis were
continuing directors of the Company and designees of certain shareholders in May
1997. Mr. Pinkerton was nominated in May 1997 by Lomak Petroleum, Inc. pursuant
to a stockholders agreement. The right to designate nominees pursuant to the
stockholders agreement terminates with the 1999 Annual Meeting of Stockholders.
The following sets forth information regarding the directors of the Company:
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY AGE
- ----------------------------- ------------------------------------------------------------ --------
<S> <C> <C>
Eugene L. Ames, Jr........... Chairman of the Board, Chief Executive Officer and Director 65
John Y. Ames................. President, Chief Operating Officer and Director 43
J.C. Anderson................ Director 68
Martin A. Bell............... Director 48
James W. Gorman.............. Director 68
Jere W. McKenny.............. Director 70
John H. Pinkerton............ Director 45
</TABLE>
<PAGE> 3
EUGENE L. AMES, JR. became Chairman, Chief Executive Officer and a
director of the Company following the acquisition of the assets and liabilities
of New Venus on May 21, 1997. He is a member of the Executive Committee. He has
been in the oil and gas business since 1954 and had been associated with New
Venus and its predecessor entities since 1962 and chief executive officer of
those predecessor entities since 1991. He graduated from the University of Texas
at Austin in 1955 with a B.S. degree in Geology. He served from 1991-93 as the
Chairman of the Independent Petroleum Association of America, the national trade
group representing independent oil and natural gas producers in Washington,
D.C., and he currently serves as a member of the Management Committee of the
American Petroleum Institute (API).
JOHN Y. AMES became President, Chief Operating Officer and a director
of the Company following the acquisition of New Venus on May 21, 1997. He is a
member of the Executive Committee. He had been associated with New Venus and its
predecessor entities as a Vice President since 1984. He became Executive Vice
President of those predecessor entities in 1995 and President and Chief
Operating Officer in 1996. He is the son of Eugene L. Ames, Jr. He graduated
from the University of Texas at Austin in 1978 with a B.B.A. in Petroleum Land
Management. He serves as the Regional Governor for the South Texas region of the
Independent Petroleum Association of America.
J.C. ANDERSON became a director of the Company on June 15, 1998. He is
the Chairman and Chief Executive Officer of Anderson Exploration, Ltd., a public
oil and gas exploration and development company based in Canada. He founded
Anderson Exploration, Ltd., as a private company in 1968 and has been employed
by it throughout that period. He holds a B.S. in Petroleum Engineering from the
University of Texas at Austin and has over 40 years experience in the oil and
gas business.
MARTIN A. BELL is the Vice Chairman and General Counsel of D. H. Blair
Investment Banking Corp. and has been a senior officer of that organization and
predecessor companies since 1991. He has served as a director of the Company
since 1991. D. H. Blair Investment Banking Corp. is a member of the New York
Stock Exchange. He is a member of the Company's Audit Committee.
JAMES W. GORMAN became a director of the Company following the
acquisition of New Venus on May 21, 1997. He is a member of the Executive and
Compensation Committees. He is a petroleum geologist and an independent investor
who has been engaged in the oil and gas business either as a drilling contractor
or independent producer for 43 years. He has also been involved in the banking
business for more than 30 years. He currently serves as a director of Cullen
Frost Bancshares (NYSE).
JERE W. McKENNY became a director of the Company following the
acquisition of New Venus on May 21, 1997. He is a member of the Audit and
Compensation Committees. He has been President of McKenny Energy Co. (oil and
gas exploration) since September 1994. In 1977, he became a director and the
Vice Chairman of the Board of Kerr-McGee Corp. (oil and gas exploration), and
from 1984 until 1993, he also was President and Chief Operating Officer of
Kerr-McGee Corp. He is a director of Rutherford-Moran Oil Corp.
JOHN H. PINKERTON became a director of the Company following the
acquisition of New Venus on May 21, 1997. He has been employed by Lomak
Petroleum, Inc. (now Range Resources Corporation) since 1988, of which he was
appointed President in 1990 and Chief Executive Officer in 1992. He is a
director of Range Resources Corporation, an independent oil and gas operating
company, and of North Coast Energy, Inc., an oil and gas exploration and
production company in which Lomak acquired an approximately 50% interest in
1996. Prior to joining Range Resources Corporation, he was Senior Vice President
of Snyder Oil Corporation. He holds a B.A. degree in Business Administration
from Texas Christian University and a M.B.A. from the University of Texas.
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<PAGE> 4
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than 10%
of a registered class of the Company's equity securities, to file reports of
securities ownership and changes in such ownership with the Securities and
Exchange Commission. Statements of Changes of Beneficial Ownership of Securities
on Form 4 generally are required to be filed by the tenth day of the month
following the month during which the change in beneficial ownership of
securities occurred. The Company believes that all reports of securities
ownership and changes in such ownership required to be filed during 1998 were
timely filed.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names and ages of all executive officers of the
Company as of March 31, 1999. All positions and offices with the Company and
principal positions with the Company's subsidiaries held by each such person are
also indicated. Officers generally are elected annually for one (1) year terms
or until their successors are elected and qualified. All executive officers are
United States citizens.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- ------ ---------------------------------------------------------------
<S> <C> <C>
Eugene L. Ames, Jr.......... 65 Chairman of the Board of Directors and Chief Executive Officer
John Y. Ames................ 43 President, Chief Operating Officer and Director
Eugene L. Ames, III......... 39 Vice President
Patrick A. Garcia........... 42 Treasurer and Chief Financial Officer
</TABLE>
The following is a brief description of the business background of
Messrs. Eugene L. Ames, III and Garcia. For a narrative description of the
business background of Messrs. Eugene L. Ames, Jr. and John Y. Ames, see
"--Directors of the Company."
EUGENE L. AMES, III became Vice President of the Company following the
acquisition of New Venus. He had been a Vice President of New Venus and its
predecessor entities for more than the past five (5) years. He is the son of
Eugene L. Ames, Jr.
PATRICK A. GARCIA became Chief Financial Officer and Treasurer of the
Company following the acquisition of New Venus. He had held the position of
Treasurer at New Venus and its predecessors since 1984.
ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth the compensation paid by the Company for
the past two fiscal years to its chief executive officer and its other executive
officers whose salary and bonus exceeded $100,000. The financial and operating
data presented in the Annual Report on Form 10-K prior to May 21, 1997, the date
of the merger of New Venus and Xplor Corporation, are data in respect of New
Venus (due to the reverse acquisition accounting applied in the merger).
Accordingly, the only information presented for 1996 relates to Mr. Gayle who
continued as an officer after the merger. At no time during this period did the
Company pay any other executive officer annual compensation exceeding $100,000.
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<PAGE> 5
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION SECURITIES ALL OTHER
FISCAL ------------------------- UNDERLYING COMPENSATION
NAME AND POSITION YEAR SALARY($) BONUS ($) OPTIONS (#) ($) (1)
- --------------------------------------------- ---- ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Eugene L. Ames, Jr., Chairman & 1998 190,000 - 0 - 40,000 3,354
Chief Executive Officer (2)............. 1997 118,750 - 0 - - 0 - 4,387
James E. Gayle, 1998 86,500 - 0 - 11,000 42,604 (4)
Executive Vice President (3)............ 1997 112,910 (5) 7,500 - 0 - (6) - 0 -
1996 92,000 - 0 - - 0 - - 0 -
John Y. Ames, President & 1998 106,250 - 0 - 20,000 7,125
Chief Operating Officer (7).............. 1997 59,458 - 0 - - 0 - 4,302
Eugene L. Ames, III, 1998 86,750 - 0 - 12,000 5,491
Vice President (8)...................... 1997 48,208 - 0 - - 0 - 2,200
Patrick A. Garcia, Treasurer & 1998 78,750 - 0 - 12,000 4,061
Chief Financial Officer (9)............ 1997 46,625 - 0 - - 0 - 2,298
</TABLE>
- -----------------------
(1) Except as otherwise specified, this amount consists of cash amounts
contributed by Venus Exploration, Inc. to match a portion of the
executive's contributions under the 401(k) Plan, group term life
insurance provided to employees and personal use of company-owned
vehicle.
(2) Eugene L. Ames, Jr., became Chief Executive Officer in May 1997,
replacing Mr. Gayle, who held the referenced positions before the
acquisition of New Venus. After that transaction, Mr. Gayle was elected
by the Board of Directors to serve as Executive Vice President.
(3) James E. Gayle served as chief executive officer of Xplor before the
reverse merger into Venus Exploration, Inc. in May 1997. He then became
Executive Vice President of the Company. Mr. Gayle resigned from Venus
Exploration, Inc. effective November 15, 1998.
(4) The 1998 figure of $42,604 for all other compensation includes
termination benefits.
(5) James E. Gayle's 1997 salary was $96,000. The figure $112,910 is the
result of deferred compensation from 1996.
(6) As disclosed in the proxy statement for the Special Meeting of
Stockholders held on October 28, 1997, in connection with the
acquisition of New Venus, Mr. Gayle surrendered 50,000 of the 150,000
options he received in 1995. In connection with that surrender, the
exercise dates of the remaining options were partially accelerated.
(7) John Y. Ames became President and Chief Operating Officer on May 21,
1997.
(8) Eugene L. Ames, III became Vice President on May 21, 1997.
(9) Patrick A. Garcia became Treasurer and Chief Financial Officer on May
21, 1997.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- ----------------------------------------------------------------------------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
- ------------------------------ ----------- ------------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Eugene L. Ames, Jr.......... 40,000 20.00% $ 3.7125 02/28/03 $ 41,028 $ 90,661
James E. Gayle.............. 11,000 5.50% $ 3.3750 02/29/08 $ 10,257 $ 22,665
Eugene L. Ames, III......... 12,000 6.00% $ 3.7125 02/28/03 $ 12,308 $ 27,198
Patrick A. Garcia........... 12,000 6.00% $ 3.3750 02/29/08 $ 25,470 $ 64,547
John Y. Ames................ 20,000 10.00% $ 3.7125 02/28/03 $ 20,514 $ 45,330
</TABLE>
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<PAGE> 6
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows for the Company's Chief Executive Officer and
the other executive officers named in the Summary Compensation Table, the number
of shares acquired upon the exercise of options during 1998, the amount realized
upon such exercise, the number of shares covered by both exercisable and
non-exercisable stock options as of December 31, 1998 and the values for
"in-the-money" options, based on the positive spread between the exercise price
of any such existing stock options and the year-end price of the Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT DECEMBER 31, 1998 OPTIONS AT DECEMBER 31, 1998 (1)
ACQUIRED ON ---------------------------- --------------------------------
EXERCISE OF VALUE
NAME OPTIONS(#) REALIZED($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- -------------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eugene L. Ames, Jr (3)... - 0 - $ - 0 - 90,584 40,000 $ - 0 - $ - 0 -
James E. Gayle........... - 0 - $ - 0 - 211,000 - 0 - $ 6,250 $ - 0 -
John Y. Ames............. - 0 - $ - 0 - 21,901 20,000 $ - 0 - $ - 0 -
Eugene L. Ames, III...... - 0 - $ - 0 - 12,700 12,000 $ - 0 - $ - 0 -
Patrick A. Garcia........ - 0 - $ - 0 - 7,229 12,000 $ - 0 - $ - 0 -
</TABLE>
(1) Aggregate market value based on December 31, 1998 stock price of $1.375
per share of the shares covered by the options. Only 100,000 of the
211,000 options issued to Mr. Gayle were in the money with a value of
$6,250.
(2) Represents the difference between the aggregate exercise price and the
aggregate value, based upon the stock price on the date of exercise.
(3) Exercisable options include 56,548 options owned by Ellen R.Y. Ames, wife
of Eugene L. Ames, Jr., and 19,746 options owned by Venus Oil Company
which is controlled by Eugene L. Ames, Jr., and his wife, Ellen.
EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
On June 1, 1996, Eugene L. Ames, Jr. entered into a three year
employment contract with Venus Energy PLC that established his annual salary at
$190,000 per year and other compensation including the use of an automobile.
Since May 1998, Eugene L. Ames, Jr., has declined the use of the automobile. The
employment agreement also included agreements by Eugene L. Ames, Jr. with regard
to confidentiality and noncompetition in order to protect the Company's
proprietary information. Upon completion of the acquisition of New Venus, Eugene
L. Ames, Jr.'s salary was paid by Venus Exploration, Inc. as the successor
entity to Venus Energy PLC. Effective May 1, 1999, Eugene L. Ames, Jr. has
agreed to a temporary 35% salary reduction.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Currently, decisions on compensation of the Company's executive
officers are made by the Compensation Committee of the Board of Directors.
Messrs. Gorman, McKenny and Pinkerton serve on the Compensation Committee. No
member of the Compensation Committee was employed by the Company during 1998.
The following addresses the Company's executive officer compensation
policies for 1998.
GENERAL. The Company's compensation program is designed to enable the
Company to attract, motivate and retain high quality senior management by
providing a competitive total compensation opportunity based on performance. To
this end, the Company provides for competitive base salaries,
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<PAGE> 7
bonuses based on subjective factors and stock-based incentives that strengthen
the mutuality of interests between employees and the Company's stockholders.
SALARIES. Eugene L. Ames, Jr.'s salary for 1998 was provided for in an
employment agreement. The material terms of Eugene L. Ames, Jr.'s employment
agreement are described above under the caption "Employment Agreement with Chief
Executive Officer."
Salaries of executive officers of the Company were determined based
upon the level of responsibility, time with the Company, contribution and
performance of the particular executive officer. Evaluation of these factors was
subjective, and no fixed or relative weights were assigned to the factors
considered. Because of the economic conditions in the oil and natural gas
industry and the impact upon the Company's performance, the salaries of
executive officers for 1999 have been temporarily reduced from between 21.5% to
35%. These salary reductions will be offset by the grant of additional stock
options to the Company's executive officers.
BONUS COMPENSATION. Through the use of annual bonuses, the Company
seeks to effectively tie executive compensation to Company performance. The
Compensation Committee determined during 1998 that no bonuses would be paid to
its officers and employees based on various factors, including: (i) the market
price of the Common Stock at the 1997 year end; (ii) the attainment of the
Company's goals for 1997; and (iii) the discretion of the Compensation Committee
taking into account the financial performance of the Company.
OPTIONS AND RESTRICTED STOCK GRANTS. The Company uses grants of stock
options and restricted stock to its key employees and executive officers to
closely align the interests of such employees and officers with the interests of
its stockholders. The Plan is administered by the Compensation Committee, which
determines the persons eligible, the number of shares subject to each grant, the
exercise price of options thereof and the other terms and conditions of the
option or restricted stock.
THE COMPENSATION COMMITTEE
--------------------------
James W. Gorman
Jere W. McKenny
John H. Pinkerton
DIRECTOR COMPENSATION
Directors of the Company are compensated under the 1997 Incentive Plan.
Under the 1997 Incentive Plan, nonemployee directors receive (i) $12,000 per
year, and (ii) $500 per board meeting attended, whether in person or by phone.
Such payments are made in the form of grants of shares of Common Stock or, at
the option of a director, a combination of the Company's Common Stock and cash.
In the case of the second option, the cash compensation is limited to a maximum
of 25% of the $12,000 per year.
FIVE-YEAR STOCKHOLDER RETURN COMPARISON
Set forth below is a line graph comparing, for the five (5)-year period
ending December 31, 1998, the yearly percentage change in the cumulative total
stockholder return on the Common Stock with that of (i) all U.S. companies
quoted on the Nasdaq Market Index and (ii) the SIC Code Index for crude
petroleum and natural gas stocks. The stock price performance shown on the graph
below is not necessarily indicative of future price performance.
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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG VENUS EXPLORATION INC.,(1)
NASDAQ MARKET INDEX
AND SIC CODE INDEX
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
----------------------------------------------------------------------------------
COMPANY 1993 1994 1995 1996 1997 1998
- -------------------------------------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Venus Exploration, Inc.............. 100.000 122.22 144.44 188.89 311.11 122.22
Industry Index...................... 100.000 104.91 112.92 143.74 134.83 86.35
Broad NASDAQ Market................. 100.000 96.80 135.44 166.20 203.60 282.27
</TABLE>
* $100 INVESTED ON 12/31/93 IN STOCK OR INDEX
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
- ---------------
(1) Stock prices shown for dates prior to May 21, 1997 are attributable to
Xplor Corporation, and its financial history is not contained in the
Company's Annual Report on Form 10-K. Therefore, comparisons of the stock
price history with other historical financial data for the period before
May 21, 1997 is misleading.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
OWNERSHIP OF SECURITIES
The following table sets forth the information as of March 31, 1999,
regarding the shares of Common Stock owned by and shares of Common Stock
underlying options exercisable on or before June 29, 1999 by (i) each person
including any group who is known by management to be the beneficial owner of
more than 5% of the Common Stock as of such date, (ii) each director of the
Company, (iii) the Company's executive officers, and (iv) all directors and
executive officers of the Company as a group based upon shares of Common Stock
outstanding on such date.
<TABLE>
<CAPTION>
AMOUNT & NATURE OF
DIRECTORS AND EXECUTIVE OFFICERS BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
- --------------------------------------------------- -------------------------- -------------------
<S> <C> <C>
Eugene L. Ames, Jr................................. 1,919,105 (2) 15.38%
John Y. Ames....................................... 481,017 (3) 3.86%
Eugene L. Ames, III................................ 329,073 (4) 2.64%
J. C. Anderson..................................... 9,355 *
Martin A. Bell..................................... 47,642 (5) *
Patrick A. Garcia.................................. 160,579 (6) 1.29%
James W. Gorman.................................... 206,938 (7) 1.66%
Jere W. McKenny.................................... 50,341 (8) *
John H. Pinkerton.................................. 7,142 (9) *
Directors and Executive Officers as a group
(9 persons)....................................... 3,211,192 25.74%
</TABLE>
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<PAGE> 9
<TABLE>
<CAPTION>
AMOUNT & NATURE OF
NAME AND ADDRESS OF FIVE PERCENT SHAREHOLDERS BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
- --------------------------------------------------- --------------------------- ----------------
<S> <C> <C>
Eugene L. Ames, Jr
1250 N.E. Loop 410, Suite 1000
San Antonio, TX 78209............................. 1,919,105 (2) 15.38%
J. Morton Davis
44 Wall Street
New York, NY 10005................................ 1,549,139 12.42%
Range Resources Corporation
500 Throckmorton Street
Fort Worth, TX 76102.............................. 2,324,532 18.64%
Stratum Group Energy Partners, LP
1330 Sixth Avenue, 33rd Floor
New York, NY 10019................................ 1,100,000 8.82%
</TABLE>
- -----------------
* Less than one percent (1%).
(1) All persons named have sole voting and investment power, except as
otherwise noted.
(2) Includes (i) 267,178 shares and 27,623 exercisable options owned by Eugene
L. Ames, Jr.; (ii) 1,140,086 shares and 56,548 exercisable options owned by
Ellen R.Y. Ames, the spouse of Eugene L. Ames, Jr.; and (iii) 407,924
shares and 19,746 exercisable options owned by Venus Oil Company, which is
controlled by Mr. and Mrs. Eugene L. Ames, Jr. Ellen R.Y. Ames may be
deemed to own 1,196,634 shares or 10.90% of the Company's Common Stock.
This does not include 26,667 unvested options owned by Eugene L. Ames, Jr.
as part of the Employee Incentive Plan.
(3) Includes exercisable options to purchase 28,568 shares. This does not
include options to purchase 13,333 shares of Common Stock not exercisable
granted under the 1997 Incentive Plan.
(4) Includes exercisable options to purchase 16,700 shares. This does not
include options to purchase 8,000 shares of Common Stock not exercisable
granted under the 1997 Incentive Plan.
(5) Includes 40,000 exercisable options. Excludes shares owned by D.H. Blair
Investment Banking Corp., with which Mr. Bell is employed, as beneficial
ownership of such shares is disclaimed by Mr. Bell.
(6) Includes exercisable options to purchase 11,229 shares. This does not
include options to purchase 8,000 shares of Common Stock not currently
exercisable granted under the 1997 Incentive Plan.
(7) Includes exercisable options to purchase 9,225 shares.
(8) Includes exercisable options to purchase 1,995 shares.
(9) Does not reflect the 2,324,532 shares reported including 192,353
exercisable options, as beneficially owned by Range Resources, Corp., of
which Mr. Pinkerton is President. Mr. Pinkerton disclaims beneficial
ownership of such shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
COCKFIELD EXPLORATION COMPANY
The Company currently operates certain wells, projects and prospects in
which Cockfield Exploration Company owns an interest. Cockfield Exploration
Company is owned by Mr. Gorman, a director of the Company or its predecessors
since June 1996. All wells and prospects in which Mr. Gorman has participated
since becoming a director are operated under project agreements or joint
operating agreements entered into prior to Mr. Gorman becoming a director of the
Company. Cockfield Exploration Company pays annual joint costs between $10,000
and $100,000 depending upon the level of active drilling during the year.
Cockfield Exploration Company received $66,300 last year in proceeds from wells
and projects operated by the Company.
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<PAGE> 10
WILL C. JONES, IV
Will C. Jones, IV ("Mr. Jones"), is the son-in-law of Eugene L. Ames,
Jr. and the brother-in-law of John Y. Ames and Eugene L. Ames, III and is
currently of counsel to Haynes and Boone, LLP. Mr. Jones and Haynes and Boone,
LLP provide legal counsel to the Company.
RANGE RESOURCES CORPORATION
Range Resources Corporation owns a 15% working interest in the Venus
Westbury Farms #1 well, Constitution Field, Jefferson County, Texas. This well
was completed in early 1998 with sales commencing in late August 1998. Range
participated on the same basis, adjusted for size of working interest, as other
non-operators. During 1998 Range paid Venus $866,000 for its share of joint
cost.
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