<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, 1999
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 410, 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
March 28, 2000, was approximately $3,200,000. As of March 28, 2000, the
Registrant had outstanding 11,086,682 shares of Common Stock.
<PAGE> 2
The undersigned Registrant hereby amends its Annual Report on Form 10-K
for the year ended December 31, 1999, 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
The undersigned Registrant also hereby refiles Exhibit 23.1
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/ Eugene L. Ames, Jr.
-------------------------
April 28, 2000 Eugene L. Ames, Jr.
2
<PAGE> 3
AMENDMENT NO. 1 TO
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
Because definitive proxy soliciting materials relating to the 2000
Annual Meeting of Stockholders of Venus Exploration, Inc. ("Venus" or the
"Company") will be filed after April 28, 2000, the information called for by
Part III if the Company's Form 10-K for the year ended December 31, 1999, is
included in this Amendment No. 1 to such Form 10-K.
PART III OF FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE COMPANY
There are eight 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.
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 66
John Y. Ames President, Chief Operating Officer and Director 44
J.C. Anderson Director 69
Martin A. Bell Director 49
James W. Gorman Director 69
Michael E. Little Director 44
Jere W. McKenny Director 71
John H. Pinkerton Director 46
</TABLE>
EUGENE L. AMES, JR. became Chairman, Chief Executive Officer and a
director of the Company following the acquisition of the assets and liabilities
of The New Venus Exploration, Inc., a Texas corporation (the "New Venus"). He is
a member of the Executive Committee. He is the father of John Y. Ames. 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 Policy Committee of the
American Petroleum Institute (API) and as Chairman of the Texas Oil and Gas
Association.
JOHN Y. AMES became President, Chief Operating Officer and a director
of the Company following the acquisition of New Venus. 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.
3
<PAGE> 4
J.C. ANDERSON 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 since that time. 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. D. H. Blair Investment Banking Corp. is a
member of the New York Stock Exchange. Mr. Bell has been a director since 1997.
He is a member of the Company's Audit Committee. Mr. Bell is also a director of
News Communications, Inc.
JAMES W. GORMAN became a director of the Company following the
acquisition of New Venus in 1997. He is a member of the Compensation Committee.
He is a petroleum geologist and has been engaged in the oil and gas business
either as a drilling contractor or independent producer for 43 years. He is
currently, and has been for more than 5 years, an independent investor in
various ventures, including exploration and development of oil and gas
properties. He is President of Cockfield Exploration, Inc., a closely-held oil
and gas company based in San Antonio, Texas. He also serves as a member of the
Board of Directors of Cullen Frost Bancshares Corporation, a bank holding
company (NYSE).
MICHAEL E. LITTLE 44, has been employed as Chairman and Chief
Executive Officer of South Texas Drilling and Exploration, Inc., an oil and gas
drilling company based in San Antonio, Texas, since 1999. From 1982 until 1999
he was President and Chairman of the Board of Dawson Production Services, Inc.,
a well servicing company based in San Antonio, Texas. He has more than 23 years
of experience in oil and gas operations management, including six years as a
drilling foreman and engineer. He is a graduate of Texas Tech University with a
B.S. Degree in Petroleum Engineering. He became a director of Venus Exploration
in 1999. Venus Exploration also retains him as a consultant. He is a member of
Venus Exploration's Executive Committee.
JERE W. MCKENNY became a director of the Company following the
acquisition of New Venus in 1997. He is a member of the Audit and Compensation
Committees. He has been President of McKenny Energy Co., an oil and gas
exploration company based in Oklahoma City, Oklahoma, since September 1994. In
1977, he became a director and the Vice Chairman of the Board of Kerr-McGee
Corp., an oil and gas exploration company based in Oklahoma City, Oklahoma, and
from 1984 until 1993, he also was President and Chief Operating Officer of
Kerr-McGee Corp.
JOHN H. PINKERTON became a director of the Company following the
acquisition of New Venus in 1997. He has been employed by Range Resources
Corporation (formerly Lomak Petroleum, Inc.), an independent oil and gas
operating company based in Fort Worth, Texas, since 1988, of which he was
appointed President in 1990 and Chief Executive Officer in 1992. He is a
director of Range Resources Corporation and of North Coast Energy, Inc., an oil
and gas exploration and production company in which Range Resources 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.
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 1999 were
timely filed.
4
<PAGE> 5
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names and ages of all executive officers of the
Company as of March 31, 2000. All positions and offices with the Company and its
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. 66 Chairman of the Board of Directors and Chief Executive Officer
John Y. Ames 44 President, Chief Operating Officer and Director
Patrick A. Garcia 43 Treasurer and Chief Financial Officer
</TABLE>
The following is a brief description of the business background of Mr.
Garcia. For a narrative description of the business background of Messrs. Eugene
L. Ames, Jr. and John Y. Ames, see "--Directors of the Company."
PATRICK A. GARCIA became Chief Financial Officer and Treasurer of the
Company following the acquisition of New Venus in 1997. He had held the position
of Treasurer at New Venus and its predecessors since 1984. He is a graduate of
Texas A & M University with a B.B.A. degree in Accounting.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth the compensation paid by the Company for
the past three 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). At no time during this period did the Company pay any other executive
officer annual compensation exceeding $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION
---------------------------- SECURITIES ALL OTHER
FISCAL UNDERLYING COMPEN-
NAME AND POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) SATION ($)(1)
- ---------------------------- ---------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Eugene L. Ames, Jr., 1999 138,858 - 52,074 2,219
Chairman and Chief 1998 190,000 - 40,000 3,354
Executive Officer (2) 1997 118,750 - - 4,387
John Y. Ames, President & 1999 90,292 - 21,898 7,539
Chief Operating Officer (3) 1998 106,250 - 20,000 7,125
1997 59,458 - - 4,302
</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 was President and CEO 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) John Y. Ames became President and Chief Operating Officer on May 21, 1997.
5
<PAGE> 6
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
-------------------------------------------------------------- -----------------------------
NUMBER OF % OF
SECURITIES OPTIONS
UNDERLYING GRANTED IN EXPIRA-
OPTIONS FISCAL EXERCISE TION
GRANTED YEAR PRICE DATE 5% 10%
--------------- ------------- ------------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Eugene L. Ames, Jr. 52,074 20.31% $ 1.2310 3/1/2004 $ 17,711 $ 39,136
John Y. Ames 21,898 8.54% $ 1.2310 3/1/2004 $ 7,448 $ 16,457
</TABLE>
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 1999, the amount realized
upon such exercise, the number of shares covered by both exercisable and
non-exercisable stock options as of December 31, 1999 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.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED DOLLAR VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT IN-THE-MONEY OPTIONS AT
ON DOLLAR DECEMBER 31, 1999 DECEMBER 31, 1999 (1)
EXERCISE VALUE ------------------------------- ------------------------------
OF REALIZED
OPTIONS (2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------- -------- ------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Eugene L. Ames, Jr. (3) - - 155,991 26,667 7,499 -
John Y. Ames - - 50,466 13,333 3,153 -
</TABLE>
- ----------------
(1) Aggregate market value based on December 31, 1999 stock price of $1.375 per
share of the shares covered by the options. Only the salary reduction
options awarded in 1999 were in the money. Those included 52,074 options
for Eugene L. Ames Jr. and 21,898 for John Y. Ames.
(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.
6
<PAGE> 7
EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
On July 1, 1999, Eugene L. Ames, Jr. entered into a two-year employment
contract with Venus Exploration that established his annual salary at $190,000
per year and other compensation, including the use of an automobile. This
agreement replaces the three-year agreement that expired on June 1, 1999. The
prior agreement also provided for annual compensation of $190,000. Since May
1998, Eugene L. Ames, Jr., has declined the use of the automobile under his
previous employment agreement and under the present one. The employment
agreement also included agreements by Eugene L. Ames, Jr. with regard to
confidentiality and noncompetition in order to protect Venus Exploration's
proprietary information.
Beginning on March 1, 1999, Mr. Ames, Jr. agreed to take a 21.5% salary
reduction, and on May 1, 1999, the salary reduction was increased to 35%. In
return for the salary reduction, Venus Exploration granted Mr. Ames, Jr., 52,074
options to buy shares of Venus Exploration's common stock and another 86,203
options that are contingent upon stockholder approval of the amendments to the
1997 Incentive Plan. All of those options had been earned by April 1, 2000. The
exercise price for the first set of options is $1.23, which was 110% of the fair
market value of a share of the common stock on the date of grant of the options.
Those options expire on February 28, 2004, and they vested in semi-monthly
increments beginning March 15, 1999. The exercise price for the second set of
options will be 110% of the fair market value of a share of the common stock on
the date of stockholder approval of the amendments to the 1997 Incentive Plan.
Those options will have a term of sixty months. The contingency for complete
vesting is stockholder approval of the amendments to the 1997 Incentive Plan
that will be submitted at the next stockholders meeting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER INFORMATION
The Compensation Committee of the Board of Directors currently consists
of James W. Gorman, Jere W. McKenny, and John H. Pinkerton. No member of the
Compensation Committee was, during fiscal 1999, an officer or employee of Venus
Exploration or any of its subsidiaries, nor was any member of the Compensation
Committee formerly an officer of Venus Exploration or any of its subsidiaries.
Also, during that year, no executive officer of the company served either as:
o a member of the compensation committee or board of directors of
another entity, one of whose executive officers served on the
Compensation Committee, or
o a member of the compensation committee of another entity, one of
whose executive officers served on Venus Exploration's Board of
Directors.
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. The
following addresses the Company's executive officer compensation policies for
1999.
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, bonuses based on
subjective factors and stock-based incentives that strengthen the mutuality of
interests between employees and the Company's stockholders.
7
<PAGE> 8
SALARIES. Eugene L. Ames, Jr.'s salary for 1999 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 Company reduced the
salaries of its executive officers beginning in March of 1999. These salary
reductions range from between 21.5% to 35%, and they have been partially offset
by the grant of additional stock options to the Company's executive officers.
Those options are similar to those granted to Mr. Ames, Jr., and discussed in
the paragraph above that describes the employment agreement with the chief
executive officer, except that the options that vested on or before August 1,
1999, and that were granted to employees other than Messrs. Ames, Jr., John Y.
Ames, and Eugene L. Ames, III, have a term of 10 years and an exercise price of
$1.1191 per share, which was the market price on the date of grant. The
contingent options issued since August 1, 1999, will have an exercise price
equal to the fair market value on the date of grant. The date of grant will be
the date stockholders approve the amendment to the 1997 Incentive Plan. Since
Mr. Ames, Jr., is the only executive officer with an employment agreement, the
salary reductions were instituted at the Company's sole discretion, although it
did consult with the individuals about its plan. The Company intends to
reinstate the prior level of salary compensation when the Company's performance
allows.
BONUS COMPENSATION. Through the use of annual bonuses, the Company
seeks to effectively tie executive compensation to the Company's performance.
The Compensation Committee determined during 1999 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 1998 year end; (ii) the attainment of
the Company's goals for 1998; 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 1997 Incentive Plan is administered by the Compensation
Committee, which determines the persons eligible for awards, 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.
8
<PAGE> 9
FIVE-YEAR STOCKHOLDER RETURN COMPARISON
Set forth below is a line graph comparing, for the five (5)-year period
ending December 31, 1999, 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.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[LINE GRAPH]
9
<PAGE> 10
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 1994 1995 1996 1997 1998 1999
- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Venus Exploration, Inc. 100.00 118.18 154.55 254.55 100.00 100.00
Industry Index 100.00 107.64 137.02 128.53 82.31 119.12
Broad NASDAQ Market 100.00 139.92 171.69 210.32 291.60 538.50
</TABLE>
* $100 INVESTED ON 12/31/94 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.
10
<PAGE> 11
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF SECURITIES
The following table sets forth the information as of March 31, 2000,
regarding the shares of Common Stock owned by and shares of Common Stock
underlying options exercisable on or before June 29, 2000, 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 and
director nominee 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, NOMINEES AND EXECUTIVE OFFICERS BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS
------------------------------------------ ------------------------ ----------------
<S> <C> <C>
Eugene L. Ames, Jr. 1,973,804(2) 14.42%
John Y. Ames 514,313(3) 3.76%
Eugene L. Ames, III 346,989(4) 2.53%
J. C. Anderson 20,882 *
Martin A. Bell 60,169(5) *
Patrick A. Garcia 176,505(6) 1.29%
James W. Gorman 314,077(7) 2.29%
Michael E. Little 234,691(8) 1.71%
Jere W. McKenny 61,868(9) *
John H. Pinkerton 18,169(10) *
Directors and Executive Officers as a group 3,721,467 27.18%
(10 persons)
</TABLE>
11
<PAGE> 12
<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 1,973,804(2) 14.42%
1250 N.E. Loop 410, Suite 1000
San Antonio, TX 78209
J. Morton Davis 1,529,139(5) 11.17%
44 Wall Street
New York, NY 10005
Range Resources Corporation 2,326,532 16.99%
500 Throckmorton Street
Fort Worth, TX 76102
Stratum Group Energy Partners, LP 1,100,000 8.03%
1330 Sixth Avenue, 33rd Floor
New York, NY 10019
</TABLE>
- -----------------------------
* Less than one percent (1%).
(1) All persons named have sole voting and investment power, except as
otherwise noted.
(2) Includes (i) 269,490 shares and 79,697 exercisable options owned by Eugene
L. Ames, Jr.; (ii) 1,140,399 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 1,196,947 shares or 8.72% 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 50,466 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 34,616 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. Chairman and owner of
D.H. Blair is J. Morton Davis, who is deemed to own 1,529,139 shares,
including 480,000 exercisable options.
(6) Includes exercisable options to purchase 27,155 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 and a convertible
subordinated note convertible into 86,957 common shares.
(8) Includes a convertible subordinated note convertible into 217,391 common
shares.
(9) Includes exercisable options to purchase 1,995 shares.
(10) Does not reflect the 2,326,532 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.
12
<PAGE> 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EUGENE L. AMES, JR.
During October 1999, Eugene L. Ames, Jr., the Chief Executive Officer
of the Company, advanced the Company $750,000 in the exchange for a Subordinated
Debenture (the "Debenture") issued by the Company. The net proceeds to the
Company were approximately $730,000 after legal and other costs associated with
the transaction. The Company used the proceeds to fund working capital. The
Company's obligation to Mr. Ames is unsecured and subordinated to the rights of
the Company's bank and other lenders (except for the holders of the 7%
Subordinated Notes that are described below, and those parties have equal
priority) unless those lenders agree otherwise. Interest is payable monthly, in
cash, at a rate equal to Frost National Bank prime rate plus 1%. On April 1,
2000, the interest rate was 9.75%.
If an event of default occurs, Mr. Ames may demand immediate repayment
of the principal amount and any accrued but unpaid interest. He will also have
all other rights generally allowed by contract and applicable law. Events of
default include, among other conditions, a default under other indebtedness or
securities.
The Debenture matures in 2004, at which time all the unpaid principal
is due and payable. The Company is obligated to redeem the Debenture if it
raises enough cash to do so by selling equity securities.
The Subordinated Debenture was issued in a private placement exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933. As a
result, the transfers of such security are restricted.
COCKFIELD EXPLORATION COMPANY
Venus Exploration currently operates approximately forty-five (45)
wells, projects and prospects in which Cockfield Exploration Company owns an
interest. Cockfield Exploration Company is owned by Mr. James W. Gorman, who has
been a director of Venus Exploration 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 drilling activity during the year. Cockfield
Exploration Company received $32,890 last year in proceeds from wells and
projects operated by Venus Exploration.
WILL C. JONES, IV
Will C. Jones, IV, is the son-in-law of Eugene L. Ames, Jr., and the
brother-in-law of John Y. Ames. He is currently of counsel to Haynes and Boone,
LLP. Mr. Jones and Haynes and Boone, LLP provide legal counsel to Venus
Exploration.
RANGE RESOURCES CORPORATION
Range Resources Corporation owns a 15% working interest in the Venus
Westbury Farms #1 well, Constitution Field, Jefferson County, Texas. Mr. John H.
Pinkerton is the president and chief executive officer of Range Resources, and
he has been a director of Venus Exploration since May 1997. The Westbury Farms
well was completed in early 1998 with sales commencing in late August 1998.
Range Resources participated on the same basis, adjusted for size of working
interest, as other non-operators. During 1999 Range Resources paid Venus
Exploration $38,435 for its share of joint costs.
JAMES W. GORMAN AND MICHAEL E. LITTLE - 7.0% CONVERTIBLE SUBORDINATED NOTE
ISSUANCE
On April 14, 1999, Venus Exploration issued to James W. Gorman, a
director of the Company, a 7.0% Convertible Subordinated Promissory Note (a
"Subordinated Note") in the principal amount of $100,000. On May 24, 1999, the
Company issued to Michael E. Little, who is now a director of the Company, a
similar note in the principal amount of $250,000. In addition to the
Subordinated Notes issued
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to Messrs. Gorman and Little, Venus Exploration has issued Subordinated Notes to
four other persons, none of whom are or were affiliated with Venus Exploration,
aggregating $650,000.
The Subordinated Notes. The Subordinated Notes bear interest at a rate
of 7% per annum, or 10% in the event of default. If interest is paid in common
stock, the number of shares to be issued will be determined by dividing the
interest payment due by the market price of one share of Venus Exploration
common stock on the last trading day preceding the interest payment date.
Interest is payable quarterly beginning on June 30, 1999. Venus Exploration has
paid all interest payments to the six noteholders with common stock, and those
payments total 39,387 shares of common stock for interest due through March 31,
2000.
The Subordinated Notes mature on March 31, 2004, at which time all of
the unpaid principal is due and payable. The noteholders can convert the debt to
common stock at any time, and the conversion is based on a price of $1.15 per
share. The conversion price will be adjusted proportionately in cases where the
number of the outstanding shares of common stock is changed on a pro rata basis;
e.g., dividends of stock and stock splits.
Another cause of an adjustment to the conversion price is if Venus
Exploration issues common stock, or securities convertible into common stock, at
a price lower than the $1.15 conversion price, as adjusted. If that happens, the
conversion price will be reduced to the price as which those other securities
are being sold.
If Venus Exploration issues convertible subordinated notes or other
similar securities with better terms, the holders of the six Subordinated Notes
also have the right to get replacement notes that have those better terms, at
least with regard to a higher stated interest rate, a higher premium upon early
redemption by Venus Exploration, a lower per-share conversion price, or a longer
period before Venus Exploration can cause a mandatory redemption.
Venus Exploration has a conditional option of converting the
outstanding balance of each Subordinated Note to shares of its common stock.
That option does not mature until thirty-six months after the original issuance
of the note, and the condition to Venus Exploration's option to convert is that
the closing market price for the shares of Venus Exploration common stock must
have exceeded $3.60 per share for at least 25 out of the preceding 30 trading
days. The conversion is based on the same $1.15 price per share.
The Subordinated Notes allow Venus Exploration to redeem them for cash
and the payment of a redemption premium. That right begins on the second
anniversary of the original issuance. The redemption premium begins at 18% and
decreases 1% per month after that, and there is a credit against the premium for
all accrued interest on the Subordinated Notes to the date of the redemption.
Venus Exploration also has a preferential right to buy the Subordinated Notes if
the holders decide to sell them.
If an event of default occurs, the noteholders may demand immediate
repayment of the principal amount and any accrued but unpaid interest. They will
also have all other rights generally allowed by contract and applicable law.
Events of default include:
o the continuation of a failure to pay the noteholders for more
than three days after any amount becomes due,
o failure to perform material obligations under the Subordinated
Notes,
o a default under other indebtedness or securities,
o a materially false or misleading representation in the
Subordinated Notes or any filings with the SEC as of the date
of the Subordinated Notes,
o bankruptcy, or
o an uninsured judgment of more than $25,000 that is not
promptly discharged.
The registration rights agreements. Concurrently with the execution of
the Subordinated Notes, Venus Exploration entered into a registration rights
agreement with each noteholder that gives the
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noteholders the option to register for resale under the Securities Act of 1933
the shares of Venus Exploration common stock that they will receive upon
conversion of the Subordinated Notes. The registration would only be on a
registration statement otherwise being filed by Venus Exploration for sales on
its own behalf. Venus Exploration also agreed not to grant any new registration
rights to third parties if those rights would adversely impact the rights of the
holders of the Subordinated Notes described above.
MICHAEL E. LITTLE
Beginning April 1, 1999, Michael E. Little was engaged by the Company
as a consultant. He provides advice and assistance in financial and
organizational matters. The Company pays him $3,500 per month and reimburses him
for his expenses incurred on behalf of the Company. The relationship may be
terminated by either party upon thirty (30) days notice.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES
(a) The following documents are filed as part of this Annual Report on
Form 10-K:
1. FINANCIAL STATEMENTS
See Index to Financial Statements on page F-1 to this Annual Report on Form
10-K.
2. FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because the information is not required under the
related instructions or is inapplicable or because the information is included
in the Financial Statements or related Notes.
3. EXHIBITS
3.1(1) Articles of Incorporation of Venus Exploration, Inc.
3.2(1) Bylaws of Venus Exploration, Inc., as amended
4.1(2) Warrant to purchase Common Stock issued to Kinder Investments, L.P.
4.1(1) Warrant to purchase Common Stock issued to Martin A. Bell
4.2(1) Form of Warrant to purchase Common Stock issued as partial
consideration in acquisition of the assets of The New Venus
Exploration, Inc., and from Lomak Production I L.P., and Lomak
Resources LLC.
4.3(8) Form of 7% Convertible Subordinated Notes
4.4(8) Form of Registration Rights Agreement between Venus Exploration, Inc.
and various holders of 7% Convertible Subordinated Notes
4.5(9) Ames Subordinated Note*
4.6(8) Form of Salary Reduction Stock Option Agreement*
9.1(1) Voting Trust Agreement dated effective March 31, 1997, among E. L.
Ames, Jr., et al.
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10.1(3) Registrant's 1985 Incentive Stock Option Plan*
10.2(2) Registrant's 1995 Incentive Stock Option Plan*
10.3(5) 1997 Incentive Plan*
10.4(1) Second Amended and Restated Loan Agreement dated December 19, 1997,
between Venus Exploration, Inc., and Wells Fargo Bank (Texas) N.A.
10.5(4) First Amendment to Second Amended and Restated Loan Agreement dated
May 19, 1998 by and between Venus Exploration, Inc. and Wells Fargo
Bank (Texas), N.A.
10.6(6) Second Amendment to Second Amended and Restated Loan Agreement dated
July 8, 1998 by and between Venus Exploration, Inc. and Wells Fargo
Bank (Texas), N.A.
10.7(6) Third Amendment to Second Amended and Restated Loan Agreement dated
August 18, 1998 by and between Venus Exploration, Inc. and Wells Fargo
Bank (Texas), N.A.
10.8(13) Fourth Amendment to Second Amended and Restated Loan Agreement dated
December 3, 1998 by and between Venus Exploration, Inc. and Wells
Fargo Bank (Texas), N.A.
10.9(13) Fifth Amendment to Second Amended and Restated Loan Agreement dated
January 16, 1999 by and between Venus Exploration, Inc. and Wells
Fargo Bank (Texas), N.A.
10.10(7) Sixth Amendment to second Amended and Restated Loan Agreement dated
March 15, 1999 between Venus Exploration, Inc. and Wells Fargo Bank
(Texas), N.A.
10.11(8) Seventh Amendment to Second Amended and Restated Loan Agreement dated
June 30, 1999 by and between Venus Exploration, Inc. and Wells Fargo
Bank (Texas), N.A.
10.12(9) Eight Amendment to Second Amended and Restated Loan Agreement
effective September 30, 1999 by and between Venus Exploration, Inc.
and Wells Fargo Bank (Texas), N.A.
10.13 ** Ninth Amendment to Second Amended and Restated Loan Agreement
effective December 31, 1999 by and between Venus Exploration, Inc. and
Wells Fargo Bank (Texas), N.A.
10.14(11) Letter Agreement dated February 4, 1999, between Venus Exploration,
Inc., and Petroleum Development Corporation
10.15(11) Amendment to Letter Agreement dated February 11, 1999, between Venus
Exploration, Inc., and Petroleum Development Corporation
10.16(12) Asset Purchase Agreement among Venus Exploration, Inc. and Allegheny
Interests, Inc., et al., dated January 26, 1999
10.17(8) Subordination Agreement dated June 30, 1999, between Wells Fargo Bank
(Texas), N.A. and EXCO Resources, Inc.
10.18(8) Intercreditor and Subordination Agreement dated June 30, 1999, between
NationsBank, N.A. and Wells Fargo Bank (Texas), N.A.
10.19(2) Note and Warrant Agreement with Kinder Investments, L.P.
10.20(9) Executive Employment Agreement dated July 1, 1999, for E.L. Ames, Jr.*
10.21(10) Settlement Agreement dated November 19, 1998 between Stratum Group,
L.P. and Venus Exploration, Inc.
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10.22(10) Registration Rights Agreement dated November 30, 1998 between Venus
Exploration, Inc. and Stratum Group, L.P.
10.23(15) Purchase and Sale Agreement between Apache Corporation as seller, and
Venus Exploration, Inc., buyer, dated May 13, 1999
10.24(15) Credit Agreement among EXUS Energy, LLC, as borrower, NationsBank,
N.A., as administrative agent, and financial institutions listed on
Schedule I, dated June 30, 1999
10.25(15) Limited Liability Company Agreement of EXUS Energy, LLC, dated June
30, 1999
10.26(15) Convertible Promissory Note made by Venus Exploration, Inc. in favor
of EXCO Resources, Inc., dated June 30, 1999
10.27(15) Pledge Agreement made by Venus Exploration, Inc. for the benefit of
EXCO Resources, Inc., dated June 30, 1999
10.28(15) Registration Rights Agreement between EXCO Resources, Inc. and Venus
Exploration, Inc., dated June 30, 1999
10.29(15) Agreement Among Members between EXCO Resources Inc., dated June 30,
1999
10.30(14) Purchase and Sale Agreement between Venus Exploration, Inc. as seller,
and Anadarko Petroleum Corporation., buyer, dated December 17, 1999
10.31 ** Amendment to Purchase and Sale Agreement dated December 17, 1999,
between Venus Exploration, Inc. as seller, and Anadarko Petroleum
Corporation., buyer, dated December 31, 1999
21.(1) List of Subsidiaries
23.1 *** Consent of KPMG LLP regarding incorporation by reference.
23.2 ** Consent of Ryder Scott Company regarding incorporation by reference.
27.1 ** Financial Data Schedule
(1) Filed as an exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, and incorporated herein by
reference.
(2) Filed as an exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995, and incorporated herein by
reference.
(3) Filed as an exhibit to Form S-4 (File No. 33-1903) declared effective
January 8, 1986, and incorporated herein by reference.
(4) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998, and incorporated herein by reference.
(5) Filed as an appendix to the Company's Proxy Statement for a Special
Meeting of Stockholders (in lieu of its Annual Meeting) held on
October 27, 1997, and incorporated herein by reference.
(6) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998, and incorporated herein by
reference.
(7) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999, and incorporated herein by
reference.
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(8) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999, and incorporated herein by reference.
(9) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999, and incorporated herein by
reference.
(10) Filed as an exhibit to the Company's Registration Statement to Form
S-3 (file no. 333-73457) with the Commission on March 5, 1999, and
incorporated herein by reference.
(11) Filed as an exhibit to the Company's Current Report on Form 8-K dated
February 12, 1999, as amended, and incorporated herein by reference.
(12) Filed as an exhibit to the Company's Current Report on Form 8-K dated
January 27, 1999, and incorporated herein by reference.
(13) Filed as an exhibit to the Company's original Annual Report on Form
10-K for the year ended December 31, 1998, and incorporated herein by
reference.
(14) Filed as an exhibit to the Company's Current Report on Form 8-K dated
December 31, 1999, and incorporated herein by reference.
(15) Filed as an exhibit to the Company's Current Report on Form 8-K dated
June 30, 1999, and incorporated herein by reference.
* Management contract or compensatory plan or arrangement.
** Previously filed.
*** Filed with this Form 10-K/A Amendment No. 1.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K dated December 31,
1999, reporting information pursuant to Item 2, Item 5 and Item 7
(including pro forma financial data reflecting the sale of the Jackson
Parish properties).
(c) Exhibits.
See the list of exhibits filed as part of this Form 10-K listed under
sub-item (a)3 above.
(d) No financial statement schedules are required to be filed herewith. See
sub-item (a)2 above.
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EXHIBIT 23.1
The Board of Directors and Shareholders
Venus Exploration, Inc.:
We consent to incorporation by reference in the registration statement (No.
33-61193) on Form S-8 and registration statement (No. 33-73457) on Form S-3 of
Venus Exploration, Inc. of our report dated April 12, 2000, relating to the
consolidated balance sheets of Venus Exploration, Inc. and subsidiaries as of
December 31, 1999, and 1998, and the related consolidated statements of
operations, shareholders' equity (deficit) and comprehensive income, and cash
flows for each of the years in the three-year period ended December 31, 1999
which report appears in the December 31, 1999, annual report on Form 10-K of
Venus Exploration, Inc.
KPMG LLP
San Antonio, Texas
April 12, 2000
