<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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 sec. 240.14a-11(c) or sec. 240.14a-12
THE EXPLORATION COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
THE EXPLORATION COMPANY
500 NORTH LOOP 1604 EAST, SUITE 250
SAN ANTONIO, TEXAS 78232
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 28, 1997
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of The Exploration Company, a
Colorado corporation (the "Company"), will be held at the office of the
Company, 500 North Loop 1604 East, Suite 250, San Antonio, Texas, on Friday,
February 28, 1997, at 10:00 a.m., for the following purposes:
1. To elect three Directors;
2. To ratify the appointment of Akin, Doherty, Klein & Feuge,
certified public accountants, as independent auditors of the
Company and its subsidiaries for the fiscal year ending August
31, 1997; and
3. To transact any other business as properly may come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on January 10,
1997, (the Record Date) are entitled to notice of and to vote at the meeting or
any adjournment thereof.
We hope you will be represented at the meeting by signing and returning
the enclosed proxy card in the accompanying envelope as promptly as possible,
whether or not you expect to be present in person. Your vote is important and
the Board of Directors of the Company appreciates the cooperation of
shareholders in promptly returning proxies.
James E. Sigmon
President
January 17, 1997
<PAGE> 3
THE EXPLORATION COMPANY
500 NORTH LOOP 1604 EAST, SUITE 250
SAN ANTONIO, TEXAS 78232
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 28, 1997
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited on behalf of the Board of Directors of
The Exploration Company for use at the Annual Meeting of Shareholders (the
"Meeting") on February 28, 1997, at 10:00 a.m., San Antonio Time to be held at
the office of the Company, 500 North Loop 1604 East, Suite 250, San Antonio,
Texas, and at any adjournment thereof.
The cost of soliciting proxies will be borne by the Company. In
addition, the Company will reimburse its transfer agent for charges and
expenses in connection with the distribution of proxy material to the
beneficial owners. Solicitations may further be made by officers, directors
and regular employees of the Company, without additional compensation, by use
of mails, telephone, telegraph or by personal calls.
Any shareholder giving a proxy for the Meeting has the power to revoke
it at any time prior to its use by giving notice in person or in writing to the
Secretary of the Company. The approximate date on which this Proxy Statement
and the accompanying form of the proxy are first sent or given to security
holders is January 17, 1997.
In addition to this Proxy Statement, the Company is pleased to enclose a
copy of the 1996 Annual Report for the fiscal year ending August 31, 1996.
PURPOSE OF MEETING
At the Meeting, action will be taken: (1) to elect three directors to
hold office until the next Annual Meeting of Shareholders and until their
successors shall have been elected and qualified; (2) to ratify the
appointment of Akin, Doherty, Klein & Feuge, as independent auditors for the
Company and its subsidiaries for the fiscal year ending August 31, 1997; and
(3) to transact any other business that may properly come before the Meeting.
The Board of Directors does not know of any other matter that is to come before
the Meeting. If any other matters are properly presented for consideration,
however, the persons authorized by the enclosed proxy will have discretion to
vote on such matters in accordance with their best judgment.
<PAGE> 4
OUTSTANDING SHARES, QUORUM AND VOTING RIGHTS
Only holders of record of Common Stock of the Company at the close of
business on January 10, 1997, shall be entitled to notice of and to vote at the
Meeting. As of the close of business on January 10, 1997, there were 9,900,044
shares of Common Stock outstanding and entitled to be voted. Each share
outstanding entitles the holder thereof to one vote.
A majority of the outstanding shares of Common Stock represented in
person or by proxy, will constitute a quorum at the Meeting. However, if a
quorum is not represented at the Meeting, the shareholders entitled to vote
thereat, present in person or represented by proxy, have the power to adjourn
the Meeting from time to time, without notice other than by announcement at the
Meeting, until a quorum is present or represented. At any such adjourned
meeting at which a quorum is present or represented, any business may be
transacted that might have been transacted at the Meeting.
Each share of Common Stock may be voted to elect up to three individuals
(the number of directors to be elected) as directors of the Company. To be
elected, each nominee must receive a plurality of all votes cast with respect
to such position as director. It is intended, that unless authorization to
vote for one or more nominees for director is withheld, proxies will be voted
for the election of all of the nominees named in this Proxy Statement.
Votes cast by proxy or in person will be counted by one or more persons
appointed by the Company to act as inspectors (the "Election Inspectors") for
the Meeting. The Election Inspectors will treat shares represented by proxies
that reflect abstentions as shares that are present and entitled to vote for
the purpose of determining the presence of a quorum and for determining the
outcome of any matter submitted to the shareholders for a vote. Under Colorado
law, in an election of directors, that number of candidates having the highest
number of votes cast in favor of their election are elected as directors. As
to the ratification of the Company's auditors, Colorado law provides that an
action of shareholders is approved if the votes cast within the voting group
favoring the action exceed the votes cast within the voting group opposing the
action. Thus abstention and broker non-votes generally would have no effect on
any vote.
Broker non-votes occur when a broker holding stock in street name votes
the shares on some matters but not others. Brokers are permitted to vote on
routine, non-controversial proposals in instances where they have not received
voting instruction from the beneficial owner of the stock but are not permitted
to vote on non-routine matters. The missing votes on non-routine matters are
deemed to be "broker non-votes." The Election Inspectors will treat broker
non-votes as shares that are present and entitled to vote for the purpose of
determining the presence of a quorum. However, for the purpose of determining
the outcome of any matter as to which the broker or nominee has indicated on
the Proxy that it does not have discretionary authority to vote, those shares
will be treated as not present and not entitled to vote with respect to that
matter (even though their shares are considered entitled to vote for quorum
purposes and may be entitled to vote on other matters).
2
<PAGE> 5
PROPOSAL I - ELECTION OF DIRECTORS
The Board of Directors has, pursuant to the Company's amended by-laws,
fixed the number of directors of the Board of Directors at three (3) members.
Three directors, constituting the entire Board, are to be elected at the
Meeting. Each director is to hold office until the next Annual Meeting or
until a successor is elected and qualified. Each of the nominees has consented
to serve as a director if elected. The proxies named in the accompanying proxy
have been designated by the Board of Directors and they intend to vote for the
following nominees for election as directors, unless otherwise instructed in
such proxy. The Board of Directors has no reason to believe that any nominee
will be unable to serve if elected. In the event any nominee shall become
unavailable for election, the proxies named in the accompanying proxy intend to
vote for the election of a substitute nominee of their selection. The
following table sets forth for each nominee for election as a director of the
Company, his age, principal occupation, position with the Company and certain
other information:
<TABLE>
<CAPTION>
Director
Names Age Principal Occupation since
----- --- -------------------- -----
<S> <C> <C> <C>
Stephen M. Gose, Jr. 67 Mr. Steve Gose has served as Chairman of the Board of 1984
Directors of the Company since July, 1984. He has been
and continues to be active in exploration and development
of oil and gas properties. Mr. Gose also serves as
Chairman of ExproFuels, Inc., a Delaware corporation that
was created to acquire the Company's alternative fuels
division.
Thomas H. Gose 41 Mr. Gose is the President and sole Director of Cibolo 1989
Properties, Inc. He has been active for over five years
in the above referenced company, its predecessors and
affiliates. He has served as a Director of the Company
since February 15, 1989 and was elected Secretary of the
Company by the Board of Directors on January 14, 1992.
Mr. Gose is also President and a Director of ExproFuels,
Inc. Thomas H. Gose is the son of Stephen M. Gose, Jr.
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
James E. Sigmon 48 Mr. James E. Sigmon has served as the Company's President 1984
since February 1985. He also served in this capacity from
July 1984 to October 1984. From October 1984 to February
1985 he served as Vice Chairman of the Board of Directors
of the Company. He has been a Director of the Company
since July 27, 1984 and was elected Treasurer of the
Company by the Board of Directors on January 14, 1992.
Mr. Sigmon is also a Director of ExproFuels, Inc.
</TABLE>
None of the nominees for director or executive officers of the Company
has a family relationship with any of the other nominees for director or
executive officer except that Thomas H. Gose is the son of Stephen M. Gose, Jr.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company, as reflected in the Company's
minute book, held no formal meetings during the fiscal year ended August 31,
1996. All resolutions of the directors were adopted by unanimous written
consent, without a meeting.
The Board of Directors has no committees. The entire Board of Directors
acts as the nominating committee for directors and will consider nominations by
shareholders for directors. Any such nomination, together with a statement of
the nominee's qualifications and consent to be considered as a nominee and to
serve if elected, should be mailed to the Secretary of the Company no later
than November 30, 1997, to be included in the proxy statement in connection
with next year's Annual Meeting of Shareholders.
COMPENSATION OF DIRECTORS
Members of the Board of Directors of the Company are not compensated for
any services provided as a director. However, during the fiscal year ended
August 31, 1996, Mr. Stephen M. Gose, Jr. received 50,000 shares of ExproFuels,
Inc. common stock, Mr. Thomas H. Gose received 250,000 shares and Mr. James E.
Sigmon received 100,000 shares.
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following tables sets forth the beneficial ownership of the
Company's Common Stock, its only class of equity security as of January 10,
1997, of certain beneficial owners and management. Each of the persons or
entities listed has sole voting power and sole investment power with respect to
the shares listed opposite his or its name.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information concerning all persons known
to the Company to beneficially own five percent (5%) or more of its Common
Stock. as of January 10, 1997, the Record Date assuming 9,900,044 shares
outstanding and 11,350,450 fully diluted shares:
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES OF COMMON STOCK PERCENT OWNED PERCENT OWNED
OF BENEFICIAL OWNER BENEFICIALLY OWNED FULLY DILUTED OUTSTANDING
------------------- ------------------ ------------- -----------
<S> <C> <C> <C>
Thomas H. Gose 1,193,701 10.52% 12.06%
500 North Loop 1604 East
Suite 250
San Antonio, Texas 78232
Comstar BioCapital, Inc. 508,603 4.48% 5.14%
Lexham House
Hill Avenue, Amersham
Buckinghamshire, PH65DW
United Kingdom
TransEuro Capital, Inc. 508,603 4.48% 5.14%
Flacherstrasse 10
Lupfig 5242
Switzerland
Pan Pacific Investments, Inc. 508,603 4.48% 5.14%
57A Palmerson St.
Mosman Park
West Perth, Western Australia
Australia
Sorbus Investments, Inc. 508,603 4.48% 5.14%
Laubenhof 9A
Metallstrasse
Zug 603, Switzerland
John L. Hales 508,603 4.48% 5.14%
Residence Ambassadeur 3
1884 Villars Sur Ollen
Vaud, Switzerland
Finanzverwaltung des 500,000 4.41% 5.05%
Kanton St. Gallen
Davidstrasse 35
9001 St. Gallen
Switzerland
</TABLE>
5
<PAGE> 8
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Common Stock
beneficially owned as of January 10, 1997, by each director, each executive
officer named in the Summary Compensation Table, and by all directors and
executive officers as a group.
<TABLE>
<CAPTION>
Name and Address Shares of Common Stock Percent
of Beneficial Owner(1) Beneficially Owned of Class
------------------- -------------------- --------
<S> <C> <C>
James E. Sigmon 200,000 1.76%
Stephen M. Gose, Jr. 100,000 0.88%
Thomas H. Gose 1,193,701 10.52%
All Directors and Executive 1,493,701 13.16%
Officers as a group (three persons)
</TABLE>
- ---------------
(1) The address of each of the persons named herein is: 500 North Loop 1604
East, Suite 250, San Antonio, Texas 78232.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires that
Company's directors, executive officers, and persons who own more than ten
percent of the Common Stock file initial reports of ownership and reports of
changes in ownership of Common Stock with the Securities and Exchange
Commission ("SEC"). Officers, directors, and stockholders who own more than
ten percent of the Common Stock are required by the SEC to furnish the Company
with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on the review of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended August 31, 1996, all Section 16(a)
filing requirements applicable to its officers, directors, and ten percent
stockholders were complied with.
6
<PAGE> 9
EXECUTIVE OFFICERS
The Executive Officers of the Company serve at the discretion of the
Board of Directors and are chosen annually by the Board at its first meeting
following the Annual Meeting of the Shareholders. The following table sets
forth the names and ages of the Executive Officers of the Company and all
positions held with the Company.
<TABLE>
<CAPTION>
NAME(1) AGE TITLE
- ---- --- -----
<S> <C>
Stephen M. Gose, Jr. 67 Chairman of the Board
Thomas H. Gose 41 Secretary
James E. Sigmon 48 President
</TABLE>
- ---------------
(1) For a description of the business experience of Messrs. Stephen M. Gose,
Thomas H. Gose, and James E. Sigmon see "Election of Directors."
EXECUTIVE COMPENSATION
Report of the Board of Directors
The following report of the Board of Directors and the performance graph
that appears immediately after such report shall not be deemed to be soliciting
material or to be filed with the SEC under the Securities Act of 1933 or the
Securities Exchange Act of 1934 or incorporated by reference in any document so
filed.
BOARD COMPENSATION REPORT ON EXECUTIVE COMPENSATION. The entire Board
of Directors reviews and approves the payment of compensation amounting to
$40,000 or more per annum to any employee of the Company or its subsidiaries.
In addition, the Board approves all incentive compensation plans including,
without limitation, bonus plans, stock option plans and key employee
compensation agreements. The entire Board administers the Company's 1985
Amended and Restated Stock Option Plan (the "1985 Plan") and grants stock
options and attendant stock appreciation rights to officers and key employees
under the 1985 Plan. The Board also administers stock options granted under
the new 1995 Flexible Incentive Plan. The executive compensation policies and
practices are designed to provide competitive levels of compensation that
integrate pay with the Company's annual and long-term performance goals.
Compensation of the executive officers of the Company is primarily comprised of
base salary, long-term equity incentives, and miscellaneous other fringe
benefits. Because two of the Board members are also employees of the Company,
they approve their own salaries. There are no outside directors on the Board;
consequently, an independent executive compensation committee of Board members
is not possible.
7
<PAGE> 10
COMPENSATION PHILOSOPHY AND OBJECTIVES
Base Salary: The base salaries of the executive officers are established
at a level deemed appropriate to attract and retain qualified executives who
are instrumental in helping the Company achieve its business objectives. In
establishing salaries, the Board considers the recommendations of management,
the amount of responsibilities of the executive officers, the salaries of
others similarly situated within the Company, the recent performance in the
executive's area of responsibility, and any changes in the cost-of-living.
The Company considered the competitiveness of the entire compensation package
in determining the level of compensation. The salaries of the executive
officers are reviewed annually and reflect the performances of the past year.
As a result, the salaries received in 1996 reflected the individual
performances in 1995 for officers who were with the Company during the that
year.
Stock Option Plan: The 1985 Plan and the 1995 Flexible Incentive Plan
are designed to align the long-term interests of key employees with
shareholders. The Plans each set aside up to 400,000 shares of the Company's
Common Stock to be available to be offered to employees of the Company as a
long-term incentive. The exercise price of such options may not be less than
100% of the fair market value per share of the Common Stock on the date of the
grant. The number of options granted to any individual is dependent on the
individuals level of responsibility and ability to influence the performance of
the Company. Existing options under the 1985 Plan are being administered by
the Board since no new options may be granted under the terms of the 1985 Plan.
The Board of Directors is also administering the 1995 Flexible Incentive Plan
which was approved as presented to the shareholders during the 1995 Annual
Meeting.
Fringe Benefits: From time to time, the Company makes available to key
employees and executives certain other fringe benefits. The Company may
provide automobiles, club memberships, tickets to sporting or cultural events,
tickets to community events, etc. To the extent that such items are taxable to
the individual they are considered to be part of the individual's compensation
package.
EXECUTIVE COMPENSATION. On September 1, 1996, subsequent to the fiscal
year end, the compensation of the Chief Executive Officer was increased to
$120,000 per year from its previous $72,000 subject to terms specified in an
employment agreement with the Company, as amended in 1994. The Board evaluates
the CEO's contribution to the Company's long-term financial and non-financial
objectives. In addition, the Board evaluates the performance of the CEO based
upon a variety of factors including the Company's earnings per share,
enhancement of asset values and quality and the extent to which business plan
goals are met or exceeded. The Board does not assign relative weights to any
of the foregoing factors, but instead makes a subjective determination based
upon a consideration of all such factors.
During 1996, no new Company stock options were awarded to the CEO under the
terms of the 1995 Flexible Incentive Plan. However, the Board of Directors
did issue the CEO 100,000 shares of its newly created, wholly-owned subsidiary,
ExproFuels, Inc. The subsidiary is not listed on any exchange nor is there any
market for the shares. Additionally, the shares have not been registered and
are restricted as to availability for transfer.
8
<PAGE> 11
In Summary, based on the performance of the Company during the past several
years, and in light of the their efforts put forth directing the Company, the
Board has determined that the compensation paid to the CEO, as described in the
Summary Compensation Table below, as well as compensation paid to other Company
officers, serves the best interest of the Company's Shareholders.
This report is submitted by the members of the Board of Directors:
Stephen M. Gose, Jr.
Thomas H. Gose
James E. Sigmon
COMPARATIVE PERFORMANCE GRAPH. The following graph compares the
performance of the Company's common stock for the five-year period commencing
August 31, 1991 to (i) the NASDAQ market composite index (NASDAQ-US) and (ii)
NASDAQ exploration and production companies comprised of approximately 74
active companies which trade on either the NASDAQ National Market System or the
NASDAQ Small-Cap Market. The graph assumes that a $100 investment was made in
the Company's common stock and each index on August 31, 1991, and that all
dividends were reinvested. Also included are the respective investment returns
based upon the stock and index values as of the end of each year during such
five-year period. The information was provided by the Center for Research in
Security Prices (CRSP) of The University of Chicago Graduate School of
Business. The index of exploration and production companies used includes all
available NASDAQ stocks under SIC codes 1310-19 (companies engaged in oil and
gas exploration and production operations) actively traded on NASDAQ during the
comparative term. The list of comparative companies is available to
shareholders directly from CRSP or may be obtained at no cost from the Company
by writing the Company or telephoning (210) 496-5300 and requesting the
information.
9
<PAGE> 12
COMPARISON OF FIVE YEAR
CUMMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
================================================================================
Date 8/31/91 8/31/92 8/31/93 8/31/94 8/31/95 8/31/96
================================================================================
<S> <C> <C> <C> <C> <C> <C>
Company Index 100 57.143 57.143 48 51.429 42.286
- --------------------------------------------------------------------------------
Market Index 100 108.453 143.068 148.914 200.545 226.144
- --------------------------------------------------------------------------------
Peer Index 100 101.848 148.772 120.991 116.592 145.392
- --------------------------------------------------------------------------------
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The
Company does not have a compensation committee. Therefore, as set forth above
all members of the Board of Directors also serve as officers of the Company.
During the fiscal year ended August 31, 1996, the following officers
participated in deliberations of the Company's Board of Directors concerning
executive officer compensation: Mr. James E. Sigmon, Mr. Thomas H. Gose and Mr.
Stephen M. Gose, Jr.
In August, 1996, 10% of the outstanding common stock of ExproFuels, Inc.,
previously a wholly-owned subsidiary, was given as consideration to the
Directors of ExproFuels, Inc. for services rendered.
In December, 1995, the Company exchanged with a corporation affiliated with its
Chairman a 32.5% mineral property interest, with a basis of $398,403, for
certain unproved oil and gas leasehold acreage valued at $225,000, the relief
of a $100,000 note payable to the corporation and certain other assets valued
at $73,403.
There are no interlocks between the members of the Board of Directors and other
corporations nor any material transactions between the Company and such members
except as set forth herein and under "Transactions with Management and Others."
10
<PAGE> 13
SUMMARY COMPENSATION INFORMATION. The following table contains certain
information for each of the fiscal years indicated with respect to the chief
executive officer and those executive officers of the Company as to whom the
total annual salary and bonuses paid or accrued during the fiscal year ended
August 31, 1996, exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
NAME AND OTHER ANNUAL COMPENSATION ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION OPTIONS COMPENSATION(3)
------------------ ---- ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
James E. Sigmon(2) 1996 $ 72,000 $0 $ 12,498 $0 $ 7,500
President & CEO 1995 72,000 $0 $0 $0 $0
1994 88,958 $0 $0 $0 $0
</TABLE>
- -----------
(1) No other person's compensation exceeded $100,000.
(2) Mr. Sigmon is party to an employment agreement pursuant to which he has
been granted a 1% overriding royalty interest in certain leases in
Maverick County, Texas in which the Company has an interest. See
"Employment Agreement"
(3) Mr. Sigmon was granted 100,000 shares of ExproFuels, Inc.'s common
stock. The shares are not traded on an exchange, have no market and
are restricted as to trading.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
# Shares Value Options/SARs Options/SARs
Name Exercised Realized August 31, 1996 August 31, 1996
- ------------------------- --------- -------- ------------------------ ------------------
<S> <C> <C> <C> <C>
James E. Sigmon - - 150,000 $ 20,500
</TABLE>
All of Mr. Sigmon's unexercised options were exercisable as of August 31, 1996.
EMPLOYMENT AGREEMENT. On September 1, 1996, the Company and Mr. Sigmon
agreed to modify his Employment Agreement by increasing his salary from a base
salary of $ 72,000 to $120,000. During all of fiscal 1996, Mr. Sigmon's salary
was $72,000. Mr. Sigmon was also granted a 1% overriding royalty interest in
all leases acquired by the Company.
Mr. Sigmon's Employment Agreement is terminable upon ninety days notice
but his right to the overriding royalty interest is vested and cannot be
terminated.
11
<PAGE> 14
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In August, 1996, 10% of the outstanding common stock of ExproFuels, Inc.,
previously a wholly-owned subsidiary, was given as consideration to the
Directors of ExproFuels, Inc. for services rendered.
During 1996, the Company exchanged, with its investment banking group,
2,637,736 shares of its unregistered common stock for 131,860 gross acres
(32,965 net acres) of undeveloped oil and gas properties. The undeveloped
properties were valued $4,450,000, which was the investment bankers approximate
original cost basis.
In December, 1995, the Company exchanged with a corporation affiliated with its
Chairman a 32.5% mineral property interest, with a basis of $398,403, for
certain unproved oil and gas leasehold acreage valued at $225,000, the relief
of a $100,000 note payable to the corporation and certain other assets valued
at $73,403.
In the opinion of the Board of Directors of the Company, the terms of the
transactions described above were as favorable as would be available from an
independent third party.
PROPOSAL II - RATIFY APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Akin, Doherty, Klein & Feuge ("Akin
Doherty") as independent certified public accountants for the Company and its
subsidiaries for the fiscal year 1997. Akin Doherty acted in the same capacity
in 1995 and 1996.
A representative of Akin Doherty is expected to attend the Meeting, will
have the opportunity to make a statement if he decides to do so, and will be
available to answer questions. Although the submission of this matter to the
shareholders is not required by law, the Board of Directors will reconsider its
selection of independent accountants if this appointment is not ratified by the
shareholders. Ratification will require the affirmative vote of the majority
of the shares of Common Stock represented at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
AUDITORS.
12
<PAGE> 15
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
It is anticipated that the 1997 Annual Meeting of Shareholders will be
held on February 28, 1998. Proposals of shareholders intended to be presented
at the 1997 Annual Meeting must be received in writing by the Secretary of the
Company at its principal offices, 500 North Loop 1604 East, Suite 250, San
Antonio, Texas, 78232, not later than November 30, 1997.
OTHER MATTERS
No other business other than the matters set forth in this Proxy
Statement is expected to come before the meeting, but should any other matters
requiring a vote of shareholders arise, including a question of adjourning the
Meeting, the persons named in the accompanying proxy will vote thereon
according to their best judgment in the interests of the Company. In the event
that any of the nominees for director should withdraw or otherwise become
unavailable for reasons not presently known, the persons named as proxies in
the accompanying proxy will vote or refrain from voting for other persons in
their place in what they consider the best interests of the Company. The
foregoing Notice and Proxy Statement are sent by order of the Board of
Directors.
James E. Sigmon, President
January 17, 1997
San Antonio, Texas
STOCKHOLDERS ARE URGED, REGARDLESS OF THE NUMBER OF SHARES OF COMMON
STOCK OWNED, TO DATE, SIGN, AND RETURN THE ENCLOSED PROXY. YOUR COOPERATION IN
GIVING THESE MATTERS YOUR IMMEDIATE ATTENTION AND IN RETURNING YOUR PROXY
PROMPTLY IS APPRECIATED.
13
<PAGE> 16
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE EXPLORATION COMPANY
Stephen M. Gose, Jr., Thomas H. Gose and James E. Sigmon or any of
them, with power of substitution of each, are hereby authorized to represent
the undersigned at the Annual Meeting of Shareholders of The Exploration
Company, to be held at 500 North Loop 1604 East, Suite 250, San Antonio, Texas,
on February 28, 1997, at 10:00 a.m., and any adjournment thereof, and to vote
the number of shares which the undersigned would be entitled to vote if
personally present.
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTOR'S RECOMMENDATIONS
JUST SIGN THE REVERSE SIDE; NO BOXES NEED TO BE CHECKED.
[CONTINUED AND TO BE SIGNED ON OTHER SIDE.]
------------
SEE REVERSE
SIDE
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<PAGE> 17
DETACH HERE
[X] Please mark votes as in this example.
This proxy will be voted as you direct below. In the absence of such
direction, it will be voted FOR all of the Directors and FOR each of the
Proposals below.
1. SELECTION OF DIRECTORS
Nominees: Stephen M. Gose, Jr., Thomas H. Gose and James E. Sigmon
FOR [ ] WITHHELD [ ]
[ ]
--------------------------------------
For all nominees except as noted above
[ ] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
2. Proposal to Ratify the Adoption of Akin, Doherty, Klein & Feuge, P.C. as
Independent Auditors for the Company for the fiscal year 1997.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, upon such other matters as properly may come before
the meeting.
PLEASE DO NOT FOLD OR MUTILATE THIS CARD.
NOTE: Please sign exactly as name appears. Joint owners should each sign.
Executor, Administrator, or Guardian, please give full title as such. If
signer is a corporation, please sign with the full corporation name by duly
authorized officer or officers.
SIGNATURE: DATE:
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SIGNATURE: DATE:
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