<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
VENUS EXPLORATION, INC.
(Name of Registrant as Specified in Its Charter)
VENUS EXPLORATION, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
--------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------
5) Total Fee Paid:
--------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------
2) Form Schedule or Registration Statement No.:
--------------------
3) Filing Party:
----------------------------------------------------
4) Date Filed:
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<PAGE> 2
VENUS EXPLORATION, INC.
1250 NE LOOP 410, 10TH FLOOR
SAN ANTONIO, TEXAS 78209
(210) 930-4900
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 12, 2000
----------
TO THE STOCKHOLDERS OF VENUS EXPLORATION, INC.
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of
VENUS EXPLORATION, INC., will be held at 1250 NE Loop 410, Suite 1000, San
Antonio, Texas, on December 12, 2000, at 10 a.m., Central Time, for the
following purposes:
1. To elect eight (8) directors to serve until the next annual
meeting of stockholders;
2. To approve amendments to the 1997 Incentive Plan of Venus
Exploration to remove some of the limitations on the number
and type of awards that may be granted under the plan and to
increase the number of shares of common stock that may be
awarded under the plan;
3. To approve an amendment to the Certificate of Incorporation of
Venus Exploration to increase the number of authorized shares
of common stock to 50,000,000 shares;
4. To approve an amendment to the Certificate of Incorporation of
Venus Exploration to grant to the Board of Directors the power
to determine the voting rights of each share of preferred
stock that may be issued;
5. To ratify the appointment of KPMG LLP as Venus Exploration's
independent certified public accountants for the fiscal year
ending December 31, 2000; and
6. To transact such other business as may properly come before
the 2000 annual meeting.
Only stockholders of record at the close of business on October 13,
2000, will be entitled to notice of and to vote at the 2000 annual meeting or
any adjournment(s) thereof. For a period of at least ten (10) days prior to the
2000 annual meeting, a complete list of stockholders entitled to vote at the
meeting will be open to examination by any stockholder during ordinary business
hours at the offices of Venus Exploration, 1250 NE Loop 410, Suite 1000, San
Antonio, Texas 78209.
Information concerning the matters to be acted upon at the 2000 annual
meeting is set forth in the accompanying proxy statement.
A proxy card is enclosed in the envelope in which these materials were
mailed to you. Please fill in, date and sign the proxy card, and return it
promptly in the enclosed postage-paid return envelope. If you attend the 2000
annual meeting, you may withdraw your proxy at that time and vote in person.
<PAGE> 3
A copy of the Annual Report to Stockholders for the fiscal year ended
December 31, 1999, is enclosed, together with copies of the Company's Quarterly
Reports on Form 10-Q for each of the quarters ended March 31 and June 30, 2000.
By Order of the Board of Directors
San Antonio, Texas -----------------------------------
November 6, 2000 Terry F. Hardeman, Secretary
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY SO THAT YOUR VOTE MAY BE RECORDED
AT THE ANNUAL MEETING IF YOU DO NOT ATTEND PERSONALLY. PROXIES FORWARDED BY OR
FOR BROKERS OR FIDUCIARIES SHOULD BE RETURNED AS REQUESTED BY THEM.
Page 2
<PAGE> 4
VENUS EXPLORATION, INC.
1250 NE LOOP 410, 10TH FLOOR
SAN ANTONIO, TEXAS 78209
(210) 930-4900
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 12, 2000
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Venus Exploration, Inc., a
Delaware corporation, to be voted at the 2000 Annual Meeting of Stockholders of
Venus Exploration to be held at 1250 NE Loop 410, Suite 1000, San Antonio,
Texas, on December 12, 2000, at 10 a.m., Central Time, and at any adjournments
thereof.
The 2000 annual meeting is being held for the following purposes:
1. To elect eight (8) directors to serve until the next annual
meeting of stockholders;
2. To approve amendments to the 1997 Incentive Plan of Venus
Exploration to remove some of the limitations on the number
and type of awards that may be granted under the plan and to
increase the number of shares of common stock that may be
awarded under the plan;
3. To approve an amendment to the Certificate of Incorporation of
Venus Exploration to increase the number of authorized shares
of common stock from 30,000,000 to 50,000,000 shares;
4. To approve an amendment to the Certificate of Incorporation of
Venus Exploration to grant to the Board of Directors the power
to determine the voting rights of each share of preferred
stock that may be issued;
5. To ratify the appointment of KPMG LLP as Venus Exploration's
independent certified public accountants for the fiscal year
ending December 31, 2000; and
6. To transact such other business as may properly come before
the 2000 annual meeting.
The mailing address of the principal offices of Venus Exploration is
1250 NE Loop 410, 10th Floor, San Antonio, Texas 78209. The approximate date on
which this proxy statement and form of proxy are first being sent or given to
stockholders is November 6, 2000.
VOTING AT THE MEETING
Only holders of record of Venus Exploration's common stock, par value
$.01 per share, outstanding at the close of business on October 13, 2000, the
record date for the 2000 annual meeting, are entitled to notice of and to vote
at the 2000 annual meeting and at any adjournment(s) thereof. As of the close of
business on the record date, 12,337,000 shares of common stock were outstanding
and entitled to vote at the 2000 annual meeting. Unless otherwise indicated, all
references herein to percentages of outstanding shares of common stock are based
on such number of shares outstanding on the record date. Each share of common
stock is entitled to one (1) vote. Stockholders do not have the right to
cumulate their votes for directors.
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<PAGE> 5
A Quorum is Required to Transact Business
The presence, in person or by proxy, of holders of a majority of the
outstanding shares of common stock entitled to vote is necessary to constitute a
quorum at the annual meeting. For purposes of determining the presence of a
quorum and of determining the number of votes necessary to take stockholder
action, as discussed below, stockholders of record who are present at the
meeting in person or by proxy and who abstain, including brokers holding
customers' shares of record who cause abstentions to be recorded at the meeting,
are considered stockholders who are present and entitled to vote, and they count
toward the quorum.
Voting Requirements for Each Proposal
Brokers holding shares of record for customers generally are not
entitled to vote on matters unless they receive voting instructions from their
customers. As used herein, "uninstructed shares" means shares held by a broker
who has not received instructions from its customers on such matters and the
broker has so notified Venus Exploration on a proxy form in accordance with
industry practice or has otherwise advised Venus Exploration that the broker
lacks voting authority. As used herein, "broker non-votes" means the votes that
could have been cast on the matter in question by brokers with respect to
uninstructed shares if the brokers had received their customers' instructions.
Election of Directors. Directors are elected by a plurality vote, and
the eight (8) nominees who receive the most votes will be elected. In the
election of directors, votes may be cast in favor of, or may be withheld with
respect to, each nominee. Abstentions and broker non-votes will not be taken
into account in determining the outcome of the election.
Approval of the Amendments to the 1997 Incentive Plan. To be approved,
the plan amendment must receive the affirmative vote of the majority of the
shares present in person or by proxy at the annual meeting and entitled to vote.
Uninstructed shares are not entitled to vote on this matter. Therefore, broker
non-votes do not affect the outcome. Abstentions have the effect of negative
votes.
Amendments to the Certificate of Incorporation. The amendment to the
Certificate of Incorporation to increase the number of authorized shares of
common stock and the amendment to permit the Board of Directors to determine the
voting rights of any shares of preferred stock require the affirmative vote of a
majority of the shares of common stock outstanding. Uninstructed shares are not
entitled to vote on this matter. Therefore, broker non-votes do not affect the
outcome. Abstentions have the effect of negative votes.
Ratification of Auditors. To be adopted, this matter must receive the
affirmative vote of the majority of the shares present in person or by proxy at
the annual meeting and entitled to vote. Uninstructed shares are entitled to
vote on this matter. Therefore, abstentions and broker non-votes have the effect
of negative votes.
How to Vote Your Shares
Your proxy will be valid only if you sign, date and return it before
the 2000 annual meeting. If you complete all of the proxy card except the voting
instructions, then the designated proxies will vote your shares "for" the
election of the nominated directors and "for " the other four proposals. If any
nominee for election to the Board is unable to serve, which is not anticipated,
or if any other matters properly come before the meeting, the designated proxies
will vote your shares in accordance with his or their best judgment. Venus
Exploration does not know of any matters, other than those described in the
Notice of Annual Meeting of Stockholders, that will come before the 2000 annual
meeting.
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<PAGE> 6
If the 2000 annual meeting is postponed or adjourned for any reason, at
any subsequent reconvening of the 2000 annual meeting all proxies will be voted
in the same manner as such proxies would have been voted at the original
convening of the 2000 annual meeting (except for proxies that have theretofore
effectively been revoked or withdrawn), notwithstanding that they may have been
effectively voted on the same or any other matter at a previous meeting.
A stockholder of Venus Exploration who executes and returns a proxy has
the power to revoke it at any time before it is voted. A stockholder who wishes
to revoke a proxy can do so by:
o executing a later-dated proxy relating to the same shares and
by delivering it to the corporate secretary of Venus
Exploration prior to the vote at the 2000 annual meeting,
o giving written notice of the revocation to the corporate
secretary of Venus Exploration prior to the vote at the 2000
annual meeting, or
o appearing in person at the meeting and voting in person the
shares to which the proxy relates.
All written notices of revocation and other communications relating to the
revocation of proxies should be addressed as follows: Venus Exploration, Inc.,
1250 NE Loop 410, 10th Floor, San Antonio, Texas 78209, Attention: Mr. Terry F.
Hardeman, Secretary.
PROXY SOLICITATION EXPENSES
Venus Exploration will bear the cost of soliciting its proxies,
including the expenses of distributing its proxy materials. In addition to the
use of the mail, proxies may be solicited by personal interview, telephone or
telegram by directors, officers, employees and agents of Venus Exploration who
will receive no additional compensation for doing so. Venus Exploration will
reimburse brokers, custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in forwarding proxy materials to the
beneficial owners of the common stock held by them as stockholders of record.
OWNERSHIP OF SECURITIES
The following table sets forth the information as of October 1, 2000,
regarding the shares of common stock owned and shares of common stock issuable
upon exercise or conversion of outstanding options, warrants or convertible
securities that can be exercised or converted by their terms on or before
December 1, 2000, by (a) 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, (b) each director and director nominee, (c) Venus Exploration's
executive officers, and (d) all directors and executive officers 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 ............................... 1,999,212(2) 14.04%
John Y. Ames ..................................... 514,979(3) 3.63%
J. C. Anderson ................................... 28,046 *
Martin A. Bell ................................... 78,583(4) *
James W. Gorman .................................. 352,894(5) 2.49%
Michael E. Little ................................ 320,993(6) 2.26%
Jere W. McKenny .................................. 69,032(7) *
John H. Pinkerton ................................ -0-(8) *
Directors and Executive Officers as a group
(8 persons) ..................................... 3,363,739 23.70%
</TABLE>
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<PAGE> 7
<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 NE Loop 410, Suite 1000
San Antonio, TX 78209 ....................... 1,999,212(2) 14.04%
J. Morton Davis
44 Wall Street
New York, NY 10005 .......................... 1,529,139(4) 10.77%
Range Resources Corporation
500 Throckmorton Street
Fort Worth, TX 76102 ........................ 2,326,532(8) 16.39%
Stratum Group Energy Partners, LP
1330 Sixth Avenue, 33rd Floor
New York, NY 10019 .......................... 1,100,000 7.75%
</TABLE>
----------
* Less than one percent (1%).
(1) All persons named have sole voting and investment power, except as
otherwise noted.
(2) Includes (a) 267,178 shares and 93,031 exercisable options owned by
Eugene L. Ames, Jr.; (b) 1,140,086 shares and 56,548 exercisable
options owned by Ellen R.Y. Ames, the spouse of Eugene L. Ames, Jr.;
and (c) 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 8.77% of the
common stock. This does not include 13,333 unvested options owned by
Eugene L. Ames, Jr., granted under the 1997 Incentive Plan.
(3) Includes exercisable options to purchase 57,133 shares. This does not
include unvested options to purchase 6,666 shares of common stock
granted under the 1997 Incentive Plan.
(4) Includes 40,000 exercisable options. The data with respect to Mr. Bell
excludes shares owned by his employer, and Mr. Bell disclaims
beneficial ownership of his employer's shares. J. Morton Davis owns Mr.
Bell's employer, and that entity is deemed to own 1,529,139 shares,
including 480,000 exercisable options.
(5) Includes exercisable options to purchase 9,225 shares. Includes 114,285
shares of common stock issued upon conversion of the 7.0% Convertible
Subordinated Note that was held by Mr. Gorman. See "Certain
Relationships and Related Party Transactions" for a summary of the
terms of this note.
(6) Includes 285,714 shares of common stock issued upon conversion of the
7.0% Convertible Subordinated Note that was held by Mr. Little. See
"Certain Relationships and Related Party Transactions" for a summary of
the terms of this note.
(7) Includes exercisable options to purchase 1,995 shares.
(8) The data with respect to Mr. Pinkerton does not reflect the 2,326,532
shares, including 192,353 exercisable options, that are beneficially
owned by Range Resources Corporation, of which Mr. Pinkerton is
President. Mr. Pinkerton disclaims beneficial ownership of such shares.
The data with respect to Range Resources Corporation does not reflect
the shares reported by Mr. Pinkerton, individually.
Page 6
<PAGE> 8
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
At the 2000 annual meeting, stockholders will be asked to elect eight (8)
directors to serve as members of the Board of Directors until their successors
are duly elected and qualified. Your Board of Directors recommends that the
eight (8) nominees named below be elected to serve as directors. The persons
named in the proxy intend to vote the proxies FOR the election of the nominees
named below. Each nominee has consented to being named in this Proxy Statement
and to serve if elected. If any nominee refuses or becomes unable to serve as a
director, which is not anticipated, the persons named as proxies reserve full
discretion to vote for such other person as may be nominated by the Board of
Directors.
EUGENE L. AMES, JR.
JOHN Y. AMES
J.C. ANDERSON
MARTIN A. BELL
JAMES W. GORMAN
MICHAEL E. LITTLE
JERE W. MCKENNY
JOHN H. PINKERTON
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
The following paragraphs set forth certain information concerning each
nominee for election as a director. All positions and offices with Venus
Exploration held by each such person are also indicated.
EUGENE L. AMES, JR., 67, became Chairman, Chief Executive Officer and a
director of Venus Exploration following its acquisition of the assets and
liabilities of The New Venus Exploration, Inc. ("New Venus") in 1997. 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 1955 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, 45, became President, Chief Operating Officer and a director
of Venus Exploration following the acquisition of New Venus in 1997. He is a
member of the Executive Committee. He had been associated with New Venus and its
predecessor entities as 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.
J.C. ANDERSON, 70, 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. Mr. Anderson has been a
director
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<PAGE> 9
of Venus Exploration since 1998. He holds a B.S. in Petroleum Engineering from
the University of Texas at Austin and has more than 40 years experience in the
oil and gas business.
MARTIN A. BELL, 49, is the Vice Chairman and General Counsel of D. H. Blair
Investment Banking Corp., New York, New York, 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 of Venus Exploration since 1997. He is a member of Venus Exploration's
Audit Committee. Mr. Bell is also a director of News Communications, Inc.
JAMES W. GORMAN, 70, became a director of Venus Exploration 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, 45, 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, 71, became a director of Venus Exploration 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, 46, became a director of Venus Exploration following the
acquisition of New Venus in 1997. He is a member of the Audit and Compensation
Committees. He has been employed by Range Resources (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. Prior to
joining Range Resources, he was Senior Vice President of Snyder Oil Corporation.
He holds a B.A. degree in Business Administration from Texas Christian
University and an M.B.A. from the University of Texas.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
FOR DIRECTOR NAMED ABOVE.
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<PAGE> 10
BOARD MEETINGS AND STANDING COMMITTEES
The Board of Directors met five (5) times during 1999. All directors
attended at least 75% of the total number of meetings of the Board of Directors,
except for Messrs. Anderson, McKenny and Pinkerton. Mr. Pinkerton attended two
meetings, and Messrs. Anderson and McKenny attended three.
The three committees of the Board of Directors are:
o the Executive Committee, composed of Messrs. Eugene L. Ames,
Jr., John Y. Ames and Little;
o the Audit Committee, composed of Messrs. Bell, McKenny and
Pinkerton; and
o the Compensation Committee, composed of Messrs. Gorman,
McKenny and Pinkerton.
Venus Exploration does not have a standing nominating committee. The functions
customarily attributable to a nominating committee are performed by the Board of
Directors as a whole.
Subject to certain limitations specified by Venus Exploration's Bylaws
and the Delaware General Corporation Law, the Executive Committee is authorized
to exercise the powers of the Board of Directors when the Board is not in
session. The Executive Committee acted by unanimous written consent seven times
during 1999. The Audit Committee provides advice and assistance regarding
accounting, auditing and financial reporting, recommends the company's
independent auditors and monitors the results of the audit and the internal
controls structure. It did not meet or take any actions in 1999. The
Compensation Committee reviews and recommends executive compensation and
employee benefit plans. It acted by unanimous written consent one time during
1999.
MANAGEMENT AND REMUNERATION
EXECUTIVE OFFICERS
Set forth below are the names and ages of all executive officers of
Venus Exploration. 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 ...... 67 Chairman of the Board of Directors and Chief Executive Officer
John Y. Ames ............ 45 President, Chief Operating Officer and Director
</TABLE>
For a narrative description of the business background of Messrs.
Eugene L. Ames, Jr. and John Y. Ames, see "Proposal One - Election of
Directors."
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth the compensation paid by Venus
Exploration 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 for the
year ended December 31, 1997, for the period prior to May 21, 1997, the date of
the merger of New Venus and Xplor Corporation,
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are data in respect of New Venus (due to the reverse acquisition accounting
applied in the merger). At no time during this period did Venus Exploration pay
any other executive officer annual compensation exceeding $100,000. No
compensation information is given for any person for any year in which that
person was not an officer of Venus Exploration.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION SECURITIES ALL OTHER
FISCAL ----------------------- UNDERLYING COMPENSATION
NAME AND POSITION YEAR SALARY($) BONUS ($) OPTIONS (#) ($) (1)
----------------- ------ --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Eugene L. Ames, Jr., Chairman & 1999 138,858 - 0 - 52,074 2,220
Chief Executive Officer (2)....... 1998 190,000 - 0 - 40,000 3,354
1997 118,750 - 0 - - 0 - 4,387
John Y. Ames, President & 1999 90,292 - 0 - 21,898 7,539
Chief Operating Officer (3)....... 1998 106,250 - 0 - 20,000 7,125
1997 59,458 - 0 - - 0 - 4,302
Eugene L. Ames, III, 1999 73,875 - 0 - 17,916 10,447
Vice President (4)................ 1998 86,750 - 0 - 12,000(4) 5,491
1997 48,208 - 0 - - 0 - 2,200
Patrick A. Garcia, Treasurer & 1999 65,667 - 0 - 15,926 4,596
Chief Financial Officer (5)....... 1998 78,750 - 0 - 12,000 4,061
1997 46,625 - 0 - - 0 - 2,298
</TABLE>
----------
(1) Except as otherwise specified, this amount consists of cash amounts
contributed by Venus Exploration to match a portion of the executive's
contributions under the 401(k) Plan and the costs of group term life
insurance provided to employees and personal use of a company-owned
vehicle.
(2) Eugene L. Ames, Jr., became Chief Executive Officer on May 21, 1997.
(3) John Y. Ames became President and Chief Operating Officer on May 21,
1997.
(4) Eugene L. Ames, III became Vice President on May 21, 1997, and resigned
effective February 29, 2000, and he contemporaneously forfeited 8,000
of his options to buy 12,000 shares of common stock that were awarded
in 1998.
(5) Patrick A. Garcia became Treasurer and Chief Financial Officer on May
21, 1997, and resigned effective August 16, 2000.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR 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 52,074 24.50 $ 1.231 3/1/2004 $17,711 $39,136
Eugene L. Ames, III 17,916 8.43 $ 1.231 3/1/2004 $ 6,093 $13,465
John Y. Ames 21,898 10.30 $ 1.231 3/1/2004 $ 7,448 $16,457
Patrick A. Garcia 15,926 7.49 $ 1.119 3/1/2009 $11,209 $28,405
</TABLE>
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OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows, for the company's chief executive officer
and the other executive officers named in the Summary Compensation Table, the
number of shares acquired upon the exercise of options during 1999, the amount
realized upon such exercise, the number of shares covered by both exercisable
and non-exercisable stock options as of December 31, 1999, and the values for
"in-the-money" options, based on the positive spread between the exercise price
of any such existing stock options and the year-end price of the common stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON OPTIONS AT DECEMBER 31, 1999 DECEMBER 31, 1999 (1)
EXERCISE OF VALUE ---------------------------- -----------------------------
NAME OPTIONS(#) REALIZED($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eugene L. Ames, Jr (3) ... - 0 - $ - 0 - 155,991 26,667 $ 7,499 $ - 0 -
John Y. Ames ............. - 0 - $ - 0 - 50,466 13,333 $ 3,153 $ - 0 -
Eugene L. Ames, III ...... - 0 - $ - 0 - 34,616 8,000 $ 2,580 $ - 0 -
Patrick A. Garcia ........ - 0 - $ - 0 - 27,155 8,000 $ 2,930 $ - 0 -
</TABLE>
----------
(1) Aggregate market value based on December 31, 1999 stock price of $1.375
per share of the shares covered by the options.
(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.
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 98,517
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 1, 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 grant of the options, which date will be the date of adoption of
Proposal Two that is described in this Proxy Statement. Those options will
expire five years after the date of grant, and they vested contingently in
semi-monthly increments beginning August 1, 1999. The contingency for complete
vesting is
Page 11
<PAGE> 13
stockholder approval of the amendments to the 1997 Incentive Plan that are
submitted as Proposal Two in this Proxy Statement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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 Venus Exploration's executive
officers are made by the Compensation Committee of the Board of Directors. The
following addresses Venus Exploration's executive officer compensation policies
for 1999.
GENERAL. Venus Exploration's compensation program is designed to enable
Venus Exploration to attract, to motivate and to retain high quality senior
management by providing a competitive total compensation opportunity based on
performance. To this end, Venus Exploration provides for base salaries, bonuses
based on subjective factors and stock-based incentives that strengthen the
mutuality of interests between employees and Venus Exploration's stockholders.
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 the executive officers were determined based upon the level
of responsibility, time with Venus Exploration, 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 Venus Exploration's performance, Venus Exploration 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 Venus Exploration'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
options issued since August 1, 1999, have an exercise price equal to 110% of the
fair market value of a share of the common stock on the date of grant of the
options, which date will be the date of adoption of Proposal Two that is
described in this Proxy Statement. Since Mr. Ames, Jr., is the only executive
officer with an employment agreement, the salary reductions were instituted at
Venus Exploration's sole discretion, although it did consult
Page 12
<PAGE> 14
with the individuals about its plan. Venus Exploration has now reinstated the
prior levels of salary compensation.
BONUS COMPENSATION. Through the use of annual bonuses, Venus
Exploration seeks to effectively tie executive compensation to Venus
Exploration's performance. The Compensation Committee determined during 1999
that no bonuses would be paid to its officers and employees based on various
factors, including: (a) the market price of the common stock at the 1998 year
end; (b) the attainment of Venus Exploration's goals for 1998; and (c) the
discretion of the Compensation Committee taking into account the financial
performance of Venus Exploration.
OPTIONS AND RESTRICTED STOCK GRANTS. Venus Exploration 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 and the other terms
and conditions of the grants of options or restricted stock.
THE COMPENSATION COMMITTEE
James W. Gorman
Jere W. McKenny
John H. Pinkerton
DIRECTOR COMPENSATION
Directors of Venus Exploration are compensated under the 1997 Incentive
Plan. Under the 1997 Incentive Plan, non-employee directors receive (a) $12,000
per year, and (b) $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 Venus Exploration'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
ended December 31, 1999, the yearly percentage change in the cumulative total
stockholder return on the Venus Exploration common stock with that of (a) all
U.S. companies quoted on the Nasdaq Market Index and (b) 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.
[CHART]
Page 13
<PAGE> 15
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG VENUS EXPLORATION INC.,(1)
SIC CODE INDEX AND
NASDAQ MARKET INDEX
<TABLE>
<CAPTION>
COMPANY 1995 1996 1997 1998 1999
------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Venus Exploration, Inc. ...... 118.18 154.55 254.55 100.00 100.00
Industry Index ............... 107.64 137.02 128.53 82.31 119.12
Broad NASDAQ Market .......... 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.
----------
(1) Stock prices shown for dates prior to May 21, 1997 are attributable to
Xplor Corporation, and its financial history is not contained in Venus
Exploration's Annual Report on Form 10-K for the year ended December
31, 1999. Therefore, comparisons of the stock price history with other
historical financial data for the period before May 21, 1997 is
misleading.
CERTAIN RELATIONSHIPS AND RELATED PARTY 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 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 redeemed the Debenture on May 12, 2000. The Company
had used the proceeds to fund working capital. The Company's obligation to Mr.
Ames was unsecured and subordinated to the rights of the Company's bank and
other lenders (except for the holders of the 7% Subordinated Notes, which are no
longer outstanding, and those parties had equal priority) unless those lenders
were to have agreed otherwise. Interest was payable monthly, in cash, at a rate
equal to Frost National Bank prime rate plus 1%.
Venus Exploration currently operates approximately five (5) wells,
projects and prospects in which Venus Oil Company owns a royalty interest. Venus
Oil Company is owned by Mr. Ames, Jr., and his immediate family. Mr. Ames, Jr.,
devotes a portion of his time to managing Venus Oil Company. It received $4,400
last year in proceeds from wells and projects operated by Venus Exploration.
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 $32,891 last year in proceeds from wells and
projects operated by Venus Exploration.
Page 14
<PAGE> 16
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 and in the Venus-Apache Gas Unit Well #1. Both of those
wells are in the Constitution Field in 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. The
Venus-Apache Gas Unit Well #1 was completed in September 2000. Range Resources
participated on the same basis, adjusted for size of working interest, as other
non-operators. During 1999 Range Resources paid Venus Exploration $496,231 for
its share of joint costs, and it received $93,106 in 1999 as proceeds from the
Westbury Farms #1 well.
JAMES W. GORMAN AND MICHAEL E. LITTLE - CONVERSION OF 7% CONVERTIBLE
SUBORDINATED NOTES
On April 14, 1999, Venus Exploration issued to James W. Gorman, a
director of Venus Exploration, a 7.0% Convertible Subordinated Promissory Note
(a "Subordinated Note") in the principal amount of $100,000. On May 24, 1999,
Venus Exploration issued to Michael E. Little, who is now a director of Venus
Exploration, a similar note in the principal amount of $250,000. In addition to
the Subordinated Notes issued to Messrs. Gorman and Little, Venus Exploration
issued Subordinated Notes to four other persons, none of whom are or were
affiliated with Venus Exploration, aggregating $650,000.
The noteholders had the right to convert the debt into common stock at
a price of $1.15 per share. In June of 2000, Venus Exploration lowered the
conversion price to $0.875 per share in order to induce the noteholders to
convert their debt into equity. All the noteholders elected to convert, and they
received a total of 1,142,854 shares of Venus Exploration common stock in
return. The shares were issued pursuant to Sections 3(a)(9) and 4(2) of the
Securities Act of 1933.
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 noteholders the option to register
for resale under the Securities Act of 1933 the shares of Venus Exploration
common stock that they received 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 Venus
Exploration as a consultant. He provides advice and assistance in financial and
organizational matters. The company pays him $3500 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.
EXTENSION OF WARRANTS
Warrants to buy 1,044,706 shares of the company's common stock were to
expire on October 23, 2000. However, by action of the board of directors, the
expiration date of those warrants was extended to January 23, 2001. The strike
price for 544,706 of the warrants remains at $3.00 per share, and the other
500,000 warrants will also retain their previous strike price of $2.00 per
share. The closing price of the Company's stock has been less than $2.00
throughout the last 12 months.
Among the holders of those warrants are Kinder Investments, L.P.,
Martin A. Bell, two affiliates of Range Resources Corporation (of which John H.
Pinkerton is President and CEO), Eugene L. Ames, Jr., Ellen R.Y. Ames (wife of
Eugene L. Ames, Jr., and mother of John Y. Ames), John Y. Ames, Elizabeth A.
Jones (daughter of Eugene L. Ames, Jr., and sister of John Y. Ames), Eugene L.
Ames, III (son of Eugene L. Ames, Jr., and brother of John Y. Ames), Stephen J.
Ames (son of Eugene L. Ames, Jr., and brother of John Y. Ames), George J. Ames
(brother of Eugene L. Ames, Jr.), Venus Oil Company (a corporation controlled by
Eugene L. Ames, Jr.), James W. Gorman and Jere W. McKenny. These entities own a
total of 844,557 of the warrants. The directors with an interest in the warrants
abstained from the vote approving the extension, and both of the disinterested
directors approved the 3-month extension of the warrants.
Page 15
<PAGE> 17
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. Based solely on an examination of Forms 4 delivered to the
Company, Venus Exploration believes that all reports of securities ownership and
changes in such ownership required to be filed during 1999 were timely filed.
PROPOSAL TWO
APPROVAL OF AMENDMENTS TO 1997 INCENTIVE PLAN
INTRODUCTION AND SUMMARY
Venus Exploration is asking for your approval of amendments to the
Venus Exploration 1997 Incentive Plan. The 1997 Incentive Plan provides that
Venus Exploration may only issue awards in an amount not to exceed 10% of Venus
Exploration's then-outstanding common stock, subject to an absolute cap of
1,500,000 shares of common stock authorized to be issued under the 1997
Incentive Plan. The 1997 Incentive Plan also has a limitation of 1,000,000
incentive stock options. The amendments to the 1997 Incentive Plan remove the
10% limit and the limit on the number of incentive stock options, and increase
the absolute cap from 1,500,000 shares of common stock to 2,000,000 shares.
The 1997 Incentive Plan was approved by the stockholders at the 1997 annual
meeting for the following purposes:
o To attract and to retain the services of employees, directors,
consultants and other qualified contractors;
o To provide employees, directors and consultants a proprietary
interest in Venus Exploration;
o To increase interest in Venus Exploration's welfare;
o To furnish an incentive for continued service; and
o To provide a means to recruit persons to enter employment with
Venus Exploration.
The components of the 1997 Incentive Plan are incentive stock options,
non-qualified stock options, stock appreciation rights, stock awards and cash
awards. The exercise price of the incentive stock options must be at least the
fair market value of the common stock on the day the option is granted. Upon
exercising an option, an optionee must pay Venus Exploration the exercise price
in cash or other consideration as determined by the compensation committee. Any
employee or non-employee consultant, contractor or director of Venus Exploration
or its subsidiaries or partnerships is eligible to receive an award under the
1997 Incentive Plan. Venus Exploration's compensation committee, which consists
of at least two outside directors, administers the 1997 Incentive Plan. The
compensation committee has the discretion to determine vesting periods,
expiration dates and the other terms of each option granted. The compensation
committee and the Board of Directors can adjust, cancel and amend awards granted
under the 1997 Incentive Plan, subject to certain conditions.
Each of Venus Exploration's directors (including nominees for director)
and executive officers may be deemed to have an interest in the outcome of this
proposal. As described elsewhere in these proxy materials,
Page 16
<PAGE> 18
the executive officers agreed to temporary reductions of their cash compensation
as a cost-cutting measure. In lieu thereof, those persons received stock options
granted under the 1997 Incentive Plan. These option grants are in addition to
options that may be granted to such officers from time to time in the sole
discretion of the compensation committee of the Board of Directors or the Board
of Directors itself. In addition, non-employee directors receive shares of
common stock issued pursuant to the 1997 Incentive Plan as part of the
directors' compensation plan.
If this proposal is not approved, Venus Exploration might reach the
caps that would be changed by the proposed amendments to the 1997 Incentive
Plan. If that occurred, shares would not be available to issue to executive
officers, other employees, consultants or directors under the 1997 Incentive
Plan. To the extent the 1997 Incentive Plan is not available as a compensation
plan, Venus Exploration would likely be compelled to implement alternative plans
(including, possibly, a new incentive plan mirroring the 1997 Incentive Plan).
This would likely entail additional out-of-pocket expenses to Venus Exploration
to set up and to implement such a plan.
REASONS FOR AMENDMENTS
Since the adoption of the 1997 Incentive Plan, Venus Exploration has
expanded its Board of Directors to add an additional non-employee director. Of
more importance is that during 1999 Venus Exploration implemented a salary
reduction program to conserve its cash resources, and it was replacing the
reduction in cash salary with incentive stock options. Through August 1, 1999,
940,170 shares of common stock were required to support the awards under the
1997 Incentive Plan. Those awards include grants of common stock and options to
purchase common stock. Over one-fourth of such awards, or 257,457 options, were
due to the compensation reduction program. Some of those awards were received in
the amounts and by the persons as set forth below:
<TABLE>
<CAPTION>
AMOUNT
NAME OF OPTIONS
---- ----------
<S> <C>
Eugene L. Ames, Jr. .................................................. 92,074
John Y. Ames ......................................................... 41,898
Eugene L. Ames, III .................................................. 43,416
Patrick A. Garcia .................................................... 53,407
All current executive officers as a group ............................ 133,972
All current directors who are not executive officers as a group ...... 188,926
J. C. Anderson ....................................................... 23,046
Martin A. Bell ....................................................... 26,833
James W. Gorman ...................................................... 26,333
Michael E. Little .................................................... 15,691
Jere W. McKenny ...................................................... 67,037
John H. Pinkerton .................................................... 24,986(1)
Thomas E. Ewing ...................................................... 77,926
Bonnie Weise ......................................................... 77,926
James E. Gayle ....................................................... 71,415
John H. Sowell, III .................................................. 48,711
</TABLE>
----------
(1) Mr. Pinkerton has assigned all of these shares to his employer, Range
Resources Corporation.
Page 17
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Currently, the 1997 Incentive Plan provides that Venus Exploration may
only issue awards in an amount not to exceed 10% of Venus Exploration's
then-outstanding common stock, and in no event can more than 1,500,000 shares of
common stock be issued under the 1997 Incentive Plan. From those limits, the
options granted under previous plans must also be subtracted. At the record
date, there were 12,337,000 shares of common stock outstanding; accordingly,
only 1,233,700 shares of common stock may be issued under the 1997 Incentive
Plan and the prior plans. Therefore, only an additional 85,023 shares and
options are currently available for grant under the 1997 Incentive Plan, and
that does not count the 251,617 contingent options that have been granted after
August 1, 1999, and through March 31, 2000.
Also, the 1997 Incentive Plan limits the number of incentive stock
options that can be awarded. That limit is 1,000,000 incentive stock options,
even if more than 1,000,000 shares of common stock could be the subject of
awards under the "10% of outstanding" limitation.
Both the "10% of outstanding" limitation and the "1 million Incentive
Stock Options" limitation will limit and frustrate the purpose of the 1997
Incentive Plan itself and Venus Exploration's salary reduction plan. For
example, the "10% of outstanding" limitation prevented the continuation of the
salary reduction program after August 1, 1999, and the "1 million Incentive
Stock Options" limitation would leave only about 300,000 incentive stock options
for all other purposes if the contingent awards granted under the salary
reduction program for the period of August 1, 1999, through March 31, 2000 are
recognized.
THE AMENDMENTS
Venus Exploration requests stockholder approval of an amendment to the
1997 Incentive Plan that would remove both the 10% limit described above and the
cap of 1,000,000 shares for incentive stock options. Venus Exploration also
requests stockholder approval of an amendment to the 1997 Incentive Plan that
will increase the number of shares authorized for awards under the plan. That
new maximum number of authorized shares would be 2,000,000. These amendments
would permit Venus Exploration to grant options to purchase up to 2,000,000
shares of its common stock, regardless of the number of shares of common stock
that are outstanding. The Board of Directors has approved these amendments.
MARKET VALUE
As of October 2, 2000, the aggregate market value of the shares of
common stock underlying outstanding options under the 1997 Incentive Plan was
$986,216 (based on the stock of price of $0.875 per share on such date).
NEW 1997 INCENTIVE PLAN BENEFITS
It is not possible to predict the individuals who will receive future
awards under the 1997 Incentive Plan or the number of shares of common stock
covered by any future award because such awards are wholly within the discretion
of the compensation committee and the Board of Directors.
Page 18
<PAGE> 20
FEDERAL TAX CONSEQUENCES
The federal income tax discussion set forth below is intended for
general information only. State and local income tax consequences are not
discussed, and may vary from locality to locality.
Non-Qualified Stock Options. Under present regulations, an optionee who
is granted a non-qualified stock option will not realize taxable income at the
time the option is granted. In general, an optionee will be subject to tax for
the year of exercise on an amount of ordinary income equal to the excess of the
fair market value of the shares on the date of exercise over the option price,
and Venus Exploration will receive a corresponding deduction. Income tax
withholding requirements apply upon exercise. The optionee's basis in the shares
so acquired will be equal to the option price plus the amount of ordinary income
upon which he is taxed. Upon subsequent disposition of the shares, the optionee
will realize capital gain or loss, long-term or short-term, depending upon the
length of time the shares are held after the option is exercised.
Incentive Stock Options. An optionee is not taxed at the time an
incentive stock option is granted. The tax consequences upon exercise and later
disposition depend upon whether the optionee was an employee of Venus
Exploration or a subsidiary at all times from the date of grant until three
months preceding exercise (one year in the case of death or disability) and on
whether the optionee holds the shares for more than one year after exercise and
two years after the date of grant of the option. If the optionee satisfies both
the employment rule and the holding rule, for regular tax purposes the optionee
will not realize income upon exercise of the option and Venus Exploration will
not be allowed an income tax deduction at any time. The difference between the
option price and the amount realized upon disposition of the shares by the
optionee will constitute a long-term capital gain or a long-term capital loss,
as the case may be. Neither the employment rule nor the holding rule will apply
to the exercise of an option by the estate of an optionee, provided that the
optionee satisfied the employment rule as of the date of such optionee's death.
If the optionee meets the employment rule but fails to observe the holding rule
(a "disqualifying disposition"), the optionee generally recognizes as ordinary
income, in the year of the disqualifying disposition, the excess of the fair
market value of the shares at the date of exercise over the option price. Any
excess of the sales price over the fair market value at the date of exercise
will be recognized by the optionee as capital gain (long-term or short-term
depending on the length of time the stock was held after the option was
exercised). If, however, the sales price is less than the fair market value at
the date of exercise, then the ordinary income recognized by the optionee is
generally limited to the excess of the sales price over the option price. In
both situations, Venus Exploration's tax deduction is limited to the amount of
ordinary income recognized by the optionee. Different consequences will apply
for an optionee subject to the alternative minimum tax.
Withholding. Venus Exploration shall have the right to reduce the
number of shares of common stock deliverable pursuant to the 1997 Incentive Plan
by an amount which would have a fair market value equal to the amount of all
federal, state or local taxes to be withheld, based on the tax rates then in
effect or the tax rates that Venus Exploration reasonably believes will be in
effect for the applicable tax year, or to deduct the amount of such taxes from
any cash payment to be made to the participant, pursuant to the 1997 Incentive
Plan or otherwise.
Any Stockholder may obtain a copy of the 1997 Incentive Plan as amended
by writing to Venus Exploration, Inc., 1250 NE Loop 410, Suite 1000, San
Antonio, Texas 78209, Attention: Corporate Secretary. Requests may also be made
by fax to (210) 930-4901.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE AMENDMENTS TO
VENUS EXPLORATION'S 1997 INCENTIVE PLAN.
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PROPOSAL THREE
PROPOSED AMENDMENT OF THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Certificate of Incorporation of Venus Exploration currently
authorizes the issuance of up to 30,000,000 shares of common stock with a par
value of $0.01 per share. As of October 1, 2000, 12,315,430 shares were
outstanding. Another 1,916,464 shares of common stock are reserved for issuance
upon the exercise of outstanding warrants and options. That number does not
include the 251,617 contingent options granted through March 31, 2000. The
amendments to the 1997 Incentive Plan that are being submitted for approval
under Proposal Two above would permit Venus Exploration to grant about 500,000
more shares, or options to acquire shares, in addition to those that it already
may grant under the 1997 Incentive Plan. The shares outstanding plus shares
reserved for issuance under outstanding options, warrants and the 1997 Incentive
Plan total 14,231,894 shares. There are no shares of preferred stock
outstanding.
The Board of Directors deems it advisable to amend the Certificate of
Incorporation to increase the number of authorized shares of common stock to
50,000,000 shares. The additional shares of common stock would become part of
the existing class of common stock, and the additional shares, when issued,
would have the same rights and privileges as the shares of common stock now
issued. There are no preemptive rights relating to the common stock.
While the Board of Directors is of the opinion that the proposed
amendment is in the best interests of the Company and its stockholders, the
Board recognizes that there could be some disadvantages to the stockholders. The
authorized but unissued shares of Common Stock could be used by incumbent
management to make more difficult a change in control of the Company. For
example, the Company could seek to frustrate a takeover attempt by making a
private sale of a large block of shares to a third party who was opposed to such
an attempt or by issuing shares of Preferred Stock or stock rights to
stockholders, which shares or rights would acquire certain characteristics (such
as conversion or redemption rights) upon an unfriendly attempted takeover. Such
actions by the Board of Directors could also result in stockholders not being
able to participate in any possible premiums that may arise in the absence of
anti-takeover provisions. Any transaction that may be so discouraged or avoided
could be a transaction that the Company's stockholders might consider to be in
their best interests, although it should be noted that the Board of Directors
has a fiduciary duty to act in the best interests of the Company's stockholders
at all times.
The Company's Board of Directors has not proposed the amendment to
increase the number of authorized shares as an anti-takeover measure, nor does
the Board presently intend for the foreseeable future to propose anti-takeover
measures in any future proxy solicitations. Any actions taken by the Company to
discourage an attempt to acquire control of the Company may result in
stockholders not being able to participate in any possible premiums that may
arise in the absence of anti-takeover provisions, as well as may be used to
entrench management's position even if such change in control may be beneficial
to stockholders.
The Company also has the authority to issue up to 5,000,000 shares of
Preferred Stock. Those shares could be of various series, and each series could
have various designations, dividend rates, liquidation rights, preferences,
limitations and other rights that may be fixed by the Board of Directors. The
Preferred Stock is discussed in Proposal Four in which the Company is requesting
the right to determine the number of votes each share of Preferred Stock would
have. The existing rights that the Board of Directors can create in any series
of Preferred Stock and the disproportionate voting rights that could be granted
if the stockholders approve Proposal Four could also have the effect of impeding
or discouraging the acquisition or control of the Company.
Page 20
<PAGE> 22
If the proposed amendment is approved, the additional authorized shares
would be available for issuance by the Board of Directors for any proper
corporate purpose at any time without further stockholder approval except as
otherwise required by applicable law or securities exchange listing rules. The
Board of Directors believes that it is desirable to give the company this
flexibility in considering such matters as acquisitions, raising additional
capital, stock dividends or other corporate purposes, although the company has
no present plans, agreements or understandings regarding the issuance of the
proposed additional shares.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF VENUS EXPLORATION RECOMMENDS A VOTE FOR THE
PROPOSAL TO APPROVE THE AMENDMENT OF THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK TO
50,000,000 SHARES.
PROPOSAL FOUR
PROPOSED AMENDMENT OF THE CERTIFICATE OF INCORPORATION
TO MODIFY A TERM OF THE AUTHORIZED SHARES OF PREFERRED STOCK
Venus Exploration is authorized to issue up to 5,000,000 shares of
preferred stock. The preferred stock is so-called "blank check" preferred since
the Board of Directors may fix or change the terms, including:
o the division of such shares into series;
o the dividend or distribution rate;
o the dates of payment of dividends or distributions and the
dates from which they are cumulative;
o liquidation price;
o redemption rights and price;
o sinking fund requirements;
o conversion rights; and
o restrictions on the issuance of additional shares of any class
or series.
This right to fix or to change the terms, limitations and restrictions of the
preferred stock is in the Board's sole discretion, with no further authorization
by the stockholders except as may be required by applicable laws or securities
exchange listing rules.
The amendment would add to that list by allowing the Board of Directors
to also determine the number of votes given to each share of preferred stock.
Currently, the Certificate of Incorporation can be interpreted to allow only one
vote per share of preferred stock, regardless of the amount paid for it and
without regard to any of the other rights allowed to the holder of that share of
preferred stock. If preferred stock is to be used effectively and efficiently,
it would be helpful to allow the Board of Directors to determine the number of
votes allowed for each share of preferred stock.
Page 21
<PAGE> 23
Therefore, if the stockholders approve this amendment, the Board of
Directors will be entitled to determine the number of votes each share of
preferred stock is allotted, in addition to determining the other terms,
limitations and restrictions of each share of preferred stock in the various
series that may be created.
It is not possible to state the effect of the preferred stock upon the
rights of holders of common stock until the Board determines the terms relating
to one or more series of preferred stock. However, such effects might include:
o the reduction of amounts otherwise available for payment of
dividends on common stock to the extent that dividends are
payable on any issued shares of preferred stock,
o restrictions on dividends on common stock if dividends on
preferred stock are in arrears,
o dilution of the voting power of the common stock and dilution
of net income and net tangible book value per share of common
stock as a result of any such issuance, depending on the
number of shares issued and the purpose, terms and conditions
of the issuance, and
o the holders of common stock not being entitled to share in the
company's assets upon liquidation until satisfaction of any
liquidation preference granted to shares of preferred stock.
Although Venus Exploration has no present commitment for the issuance
of shares of preferred stock, the authorized but unissued shares of such stock
could be used to make a takeover or change in control in Venus Exploration more
difficult. For example, rights granted upon issuance of shares of the preferred
stock in particular could be used to create voting impediments, to give the
holders a disproportionate vote in matters that may involve a takeover or change
in control, or to otherwise discourage third parties seeking to effect a
takeover or otherwise gain control of Venus Exploration. See "Proposed Amendment
of the Certificate of Incorporation to Increase the Number of Authorized Shares
of Common Stock - Potential Anti-Takeover Effects of Proposal."
If both of the amendments to the Certificate of Incorporation are
adopted, Article Four of the Certificate of Incorporation will read as shown on
Appendix A.
THE BOARD OF DIRECTORS OF VENUS EXPLORATION RECOMMENDS A VOTE FOR THE
PROPOSAL TO APPROVE THE AMENDMENT OF THE CERTIFICATE OF INCORPORATION
TO ALLOW THE BOARD OF DIRECTORS TO FIX THE VOTING RIGHTS, AND THE
EXTENT THEREOF, OF EACH SHARE OF PREFERRED STOCK THAT MAY BE ISSUED
BY THE COMPANY.
PROPOSAL FIVE
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of Venus Exploration has appointed the firm of
KPMG LLP to serve as independent auditors of the company for the fiscal year
ending December 31, 2000. You are being asked to ratify this appointment. KPMG
has served as independent auditor for Venus Exploration since May 21, 1997. One
or more representatives of KPMG are expected to be present at the annual
meeting. Such representatives will be given an opportunity to make a statement
and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO
RATIFY THE APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS OF VENUS
EXPLORATION FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
Page 22
<PAGE> 24
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2001 Annual
Meeting of Stockholders, in accordance with Rule 14a-8 of the proxy rules of the
Securities and Exchange Commission, must be received by Venus Exploration at its
principal executive offices on or before January 8, 2001, to be eligible for
inclusion in its proxy statement and proxy relating to that meeting. At the 2001
annual meeting, management proxies will have discretionary authority to vote on
stockholder proposals that are not submitted for inclusion in the proxy
statement unless received by Venus Exploration before January 8, 2001.
OTHER BUSINESS
Management does not presently know of any matters that may be presented
for action at the 2000 annual stockholder meeting other than those set forth
herein. However, if any other matters properly come before the 2000 annual
stockholder meeting, it is the intention of the persons named in the proxies
solicited by management to exercise their discretionary authority to vote the
shares represented by all effective proxies on such matters in accordance with
their best judgment.
Please fill in, date and sign the enclosed proxy card and return it
promptly in the enclosed return envelope, which requires no additional postage
if mailed in the United States.
The Annual Report to Stockholders, which includes Venus Exploration's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999, as
amended, is enclosed. The quarterly reports on Form 10-Q for the first and
second quarters of 2000 are also enclosed. The Annual Report and the quarterly
reports do not form any part of the material for the solicitation of proxies.
By Order of the Board of Directors,
EUGENE L. AMES, JR.
Chairman and Chief Executive Officer
November 6, 2000
Page 23
<PAGE> 25
APPENDIX A
ARTICLE FOUR
The Corporation shall have authority to be exercised by the Board of
Directors to issue (i) 50,000,000 shares of common voting stock of the par value
of $0.01 per share (the "Common Stock") having an aggregate par value of Five
Hundred Thousand Dollars ($500,000), and (b) 5,000,000 shares of preferred stock
of the par value of $0.01 per share (the "Preferred Stock") having an aggregate
par value of Fifty Thousand Dollars ($50,000). Shares of Preferred Stock shall
be designated as the Board of Directors may determine and may be issued in
series by the Board of Directors as hereinafter provided in paragraph (c) below.
The relative rights and preferences of the shares of capital stock of
the Corporation shall be as follows:
(a) (1) At every meeting of the stockholders of the
Corporation, each holder of Common Stock shall be
entitled to one vote in person or by proxy for each
share of Common Stock held by that holder, and
(2) At every meeting of the stockholders of the
Corporation, each holder of Preferred Stock with
voting rights shall be entitled to such number of
votes for each share of the Preferred Stock held by
that holder as is allowed for that share and to the
extent of such rights as specified pursuant to
paragraph (c)(vii) below.
(b) Subject to the rights, if any, of the holders of the Preferred
Stock, or any series thereof, the holders of the Common Stock are entitled to
the entire voting power, all dividends declared and paid by the Corporation and
all assets of the Corporation in the event of any liquidation, dissolution or
winding up of the Corporation.
(c) The Preferred Stock may be divided into and issued from time to
time in one or more series. All shares of the Preferred Stock shall be of equal
rank and shall be identical, except with respect to the particulars that may be
fixed by the Board of Directors as hereinafter provided pursuant to authority
that is hereby expressly vested in the Board of Directors; provided, however,
that each share of a given series of the Preferred Stock shall be identical in
all respects with the other shares of such series. Before any shares of the
Preferred Stock of any particular series shall be issued, the Board of Directors
shall fix and determine, in the manner provided by law, the following
particulars with respect to the shares of such series:
(i) the distinctive designation of such series and the
number of shares of Preferred Stock that shall
constitute such series, which number may be increased
(except where otherwise provided by the Board of
Directors in creating such series) or decreased (but
not below the number of shares of such series then
issued) from time to time by the Board of Directors
by resolution;
(ii) the dividend or rate of dividend payable with respect
to shares of Preferred Stock of such series, the time
of payment of any dividend, whether dividends shall
be cumulative and, if so, the conditions under which
and the date from which dividends shall be
accumulated;
(iii) the redemption provisions applicable to the shares of
Preferred Stock of such series, if any, and if
applicable, the time or times when, the price or
prices at which, and the other terms and conditions
under which the shares of Preferred Stock of such
series shall be redeemable;
<PAGE> 26
(iv) the amount payable on shares of Preferred Stock of
such series in the event of any voluntary or
involuntary dissolution, liquidation or winding up of
the affairs of the Corporation, which shall not be
deemed to include the merger or consolidation of the
Corporation or a sale, lease or conveyance of all or
part of the assets of the Corporation;
(v) the purchase, retirement or sinking fund provisions,
if any, for the redemption or purchase of shares of
Preferred Stock of such series;
(vi) the rights, if any, of the holders of shares of
Preferred Stock of such series to convert such shares
into or exchange such shares for shares of the Common
Stock or shares of any other series of the Preferred
Stock and the terms and conditions of such conversion
or exchange;
(vii) the extent of voting rights of the shares of
Preferred Stock of such series or the absence
thereof; and
(viii) such other terms, limitations, rights and
preferences, if any, of such series as the Board of
Directors may lawfully fix under the laws of the
State of Delaware as in effect at the time of
creation of such series.
-ii-
<PAGE> 27
VENUS EXPLORATION, INC.
Suite 1000
1250 NE Loop 410
San Antonio, Texas 78209
Phone: 210/930-4900
Fax: 210/930-4901
NASDAQ SmallCap Market(TM): VENX
<PAGE> 28
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
VENUS EXPLORATION, INC.
DECEMBER 12, 2000
o Please Detach and Mail in the Envelope Provided o
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD THE BOARD OF DIRECTORS PROPOSES AND RECOMMENDS A VOTE
listed to right AUTHORITY FOR PROPOSALS 1, 2, 3, 4 AND 5.
(except as marked to vote for all
to the contrary at right) nominees listed to right
<S> <C> <C> <C>
1. ELECTION NOMINEES: Eugene L. Ames, Jr.
OF EIGHT [ ] [ ] John Y. Ames
DIRECTORS: Martin A. Bell
J.C. Anderson
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, James W. Gorman
STRIKE A LINE THROUGH THAT NOMINEE'S NAME AT RIGHT) Michael E. Little
Jere W. McKenny
John H. Pinkerton
<CAPTION>
<C> <C> <C> <C>
FOR ABSTAIN AGAINST
2. APPROVE AMENDMENTS TO 1997 [ ] [ ] [ ]
INCENTIVE PLAN.
3. APPROVE AN AMENDMENT TO THE [ ] [ ] [ ]
CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK TO
50,000,000 SHARES.
4. APPROVE AN AMENDMENT TO THE [ ] [ ] [ ]
CERTIFICATE OF INCORPORATION TO
ENLARGE THE POWER OF THE BOARD OF
DIRECTORS to determine the voting
rights of each share of preferred
stock that may be issued.
5. RATIFY SELECTION OF KPMG LLP as [ ] [ ] [ ]
independent auditors for the
fiscal year ending
December 31, 2000.
Signature(s) Dated: , 2000
--------------------------------------------------------------------------- -------
NOTE: Signature(s) of holders of Common Stock should agree with the name(s)
shown on this Proxy. For joint accounts, both owners should sign.
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 29
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VENUS EXPLORATION, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON DECEMBER 12, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Eugene L. Ames, Jr. and John Y. Ames,
or each of them as shall be in attendance at the Annual Meeting, as proxy or
proxies, with full power of substitution, to represent the undersigned at the
Annual Meeting of Stockholders of Venus Exploration, Inc., to be held on
December 12, 2000, and at any adjournment thereof, and to vote as specified on
this Proxy the number of shares of Common Stock of Venus Exploration, Inc., the
undersigned would be entitled to vote if personally present upon the matters
referred to on the reverse side hereof and in their discretion upon any other
business as may properly come before the Annual Meeting.
IF NOT MARKED TO THE CONTRARY, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4
AND 5.
IMPORTANT: THIS PROXY IS CONTINUED AND MUST BE SIGNED AND DATED ON THE REVERSE
SIDE.
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