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 Sec. 240.14a-11(c) or Sec. 240.14a-12
BELLWETHER 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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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 transactions applies:
____________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
____________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
____________________________________________________________________
(5) Total fee paid:
____________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
____________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
____________________________________________________________________
(3) Filing party:
____________________________________________________________________
(4) Date filed:
____________________________________________________________________
<PAGE>
BELLWETHER EXPLORATION COMPANY
1221 LAMAR STREET, SUITE 1600
HOUSTON, TEXAS 77010-3039
(713) 650-1025
Dear Stockholder,
You are cordially invited to attend the Annual Meeting of Stockholders of
Bellwether Exploration Company which will be held at the Houston Center Club,
1100 Caroline Street, Houston, Texas, on Friday, November 17, 1995, at 10:00
a.m.
The Notice of the Annual Meeting and Proxy Statement, which are
attached, provide information concerning the matters to be considered at the
meeting. The annual report to Stockholders for fiscal year 1995 is being mailed
to Stockholders along with these proxy materials.
It is important that your shares be represented at the meeting,
regardless of the size of your holdings. We urge you to return the signed proxy
in the enclosed envelope as soon as possible. If you do attend the meeting in
person, you may withdraw your proxy and vote your stock if you so desire. We
value your opinions and encourage you to participate in the Annual Meeting by
voting your proxy.
Very truly yours,
J. DARBY SERE
J. Darby Sere
President and Chief Executive Office
<PAGE>
BELLWETHER EXPLORATION COMPANY
1221 LAMAR STREET, SUITE 1600
HOUSTON, TEXAS 77010-3039
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 17, 1995
TO THE STOCKHOLDERS OF
BELLWETHER EXPLORATION COMPANY:
The Annual Meeting of Stockholders of BELLWETHER EXPLORATION COMPANY
(the "Company") will be held at the Houston Center Club, 1100 Caroline Street,
Houston, Texas at 10:00 a.m., Houston time, on Friday, November 17, 1995, for
the following purposes:
1. To elect the nominees of the Board of Directors to serve
until their successors are duly elected and qualified.
2. To consider and act upon a proposal to ratify the appointment of
Deloitte & Touche, LLP as the independent auditors of the Company
for the year ending June 30, 1996.
3. To transact such other business as may properly come before
the meeting or any adjournment(s) thereof.
Stockholders of record at the close of business on October 9, 1995, are
entitled to notice of and to vote at the meeting and any adjournment(s) thereof.
You are cordially invited to attend the meeting. Whether or not you are
planning to attend the meeting, you are urged to complete, date and sign the
enclosed proxy and return it promptly.
Sincerely,
J. DARBY SERE
J. Darby Sere
President and Chief Executive Officer
Houston, Texas
October 17, 1995
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
TO ENSURE REPRESENTATION AT THE MEETING, PLEASE COMPLETE, DATE AND
SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. NO ADDITIONAL POSTAGE IS NECESSARY IF MAILED IN THE UNITED
STATES.
- --------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
-------------------------------------
BELLWETHER EXPLORATION COMPANY
1221 LAMAR STREET
SUITE 1600
HOUSTON, TEXAS 77010-3039
(713) 650-1025
------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 17, 1995
------------------------------------
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by and on behalf of the Board of Directors of Bellwether
Exploration Company (the "Company") for use at the Annual Meeting of
Stockholders of the Company to be held on Friday, November 17, 1995 (the "Annual
Meeting") at 10:00 a.m. local time at the Houston Center Club, 1100 Caroline
Street, Houston, Texas, and at any adjournment thereof, for the purposes set
forth in this Proxy Statement.
This Proxy Statement and the enclosed form of proxy are being mailed on
or about October 17, 1995, to the Stockholders of record as of October 9, 1995.
The annual report to Stockholders for the Company's fiscal year ended June 30,
1995, is also being mailed to Stockholders contemporaneously with this Proxy
Statement, although the annual report does not form a part of the material for
the solicitation of Proxies.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
Unless otherwise indicated, proxies in the form enclosed that are
properly executed, duly returned and not revoked will be voted in favor of:
(1) the election of the eight nominees to the Board of Directors
of the Company named herein; and
(2) the ratification of the appointment of Deloitte & Touche,
LLP as independent auditors for the Company for the current
fiscal year ending June 30, 1996.
The Board of Directors is not presently aware of other proposals which
may be brought before the Annual Meeting. In the event other proposals are
brought before the Annual Meeting, the persons named in the enclosed form of
proxy will vote in accordance with what they consider to be in the best
interests of the Company and its Stockholders.
-1-
VOTING REQUIREMENTS
The Board of Directors of the Company has fixed the close of business
on October 9, 1995, as the record date (the "Record Date") for the determination
of Stockholders entitled to notice of and to vote at the Annual Meeting. On the
Record Date, the Company had issued and outstanding 9,045,479 shares of its
common stock, $.01 par value ("Common Stock"). A complete list of all
Stockholders entitled to vote at the Annual Meeting will be open for examination
by any Stockholder during normal business hours for a period of ten days prior
to the Annual Meeting at the offices of the Company, 1221 Lamar, Suite 1600,
Houston, Texas 77010. Such list will also be available at the Annual Meeting and
may be inspected by any Stockholder who is present. Only the record owners of
the Company's Common Stock on the Record Date are entitled to notice of and to
vote at the Annual Meeting.
QUORUM AND OTHER MATTERS
The presence in person or by proxy of the holders of a majority of the
shares of Common Stock outstanding on the Record Date is necessary to constitute
a quorum at the Annual Meeting. Each share of Common Stock is entitled to one
vote, in person or by proxy, with respect to the election of directors and any
other proposals properly brought before the Annual Meeting.
Shares of Common Stock represented by a properly signed and returned
proxy will be counted as present at the Annual Meeting for purposes of
determining a quorum, without regard to whether the proxy is marked as casting a
vote or abstaining. Shares of Common Stock held by nominees which are voted on
at least one matter coming before the Annual Meeting will also be counted as
present for purposes of determining a quorum, even if the beneficial owner's
discretion has been withheld (a "non-vote") for voting on some or all other
matters.
Directors will be elected by a favorable vote of a majority of the
shares of Common Stock present, in person or by proxy, at the Annual Meeting and
entitled to vote. All other matters to come before the Annual Meeting require
the approval of a majority of the shares of Common Stock present, in person or
by proxy, at the Annual Meeting and entitled to vote. Therefore, abstentions
will have the same effect as votes against the proposals on such matters. Broker
non-votes, however, will be deemed shares not entitled to vote on such matters,
and therefore will not count as votes for or against any of the proposals, and
will not be included in calculating the number of votes necessary for approval
of such matters.
Votes at the Annual Meeting will be tabulated by an Inspector of
Election appointed by the Company.
PROXY INFORMATION
The enclosed form of proxy may be revoked at any time prior to its
exercise by executing a new proxy with a later date, by voting in person at the
Annual Meeting, or by giving written notice of revocation to Roland E. Sledge,
Secretary of the Company, at any time before the proxy is voted at the Annual
Meeting. Please ensure that your shares will be voted by signing, dating and
returning the enclosed form of proxy in the enclosed postage-paid envelope.
-2-
<PAGE>
BENEFICIAL OWNERSHIP OF SECURITIES
MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the Record Date, the name,
address, and number of shares of Common Stock owned beneficially by (a) all
persons known to the Company to be the beneficial owners of more than five
percent of the outstanding shares of Common Stock and (b) each director (c) each
nominee for director (d) each of the executive officers named in the Summary
Compensation Table, and (e) all executive officers and directors of the Company
as a group. The information set forth in the following table is based on public
filings made with the Securities and Exchange Commission (the "Commission") as
of the Record Date and certain information supplied to the Company by the
persons listed below. Unless otherwise indicated, all shares are owned directly
and the owner has sole voting and investment power with respect thereto.
NAME AND AMOUNT AND NATURE PERCENT
ADDRESS OF OF BENEFICIAL OF
BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------------------ ----------------- -------
Allstate Insurance Company
3075 Sanders Road, Suite G5B
Northbrook, Illinois 60062 1,340,584 14.8
Torchmark Corporation
2001 Third Avenue South
Birmingham, Alabama 35233 750,196(a) 8.3
Alpine Investment Partners
767 Fifth Avenue
New York, New York 10153 729,832(b) 8.1
Pacus (UK) Limited
Audrey House
Ely Place
London EC1N 6SN England 506,568 5.6
The Mitchell Group, Inc.
1100 Louisiana, Suite 4810
Houston, Texas 77002 494,274 5.5
J. P. Bryan 884,411(c) 9.5
J. Darby Sere 240,060(d) 2.6
A. K. McLanahan 11,593(e) *
Vincent H. Buckley 6,843(e) *
Dr. Jack Birks 6,843(e) *
Michael D. Watford 271,504(f) 2.9
C. Barton Groves 185,625(g) 2.0
Habib Kairouz 4,000(h) *
All officers and directors
as a group (12 persons) 1,552,934(i) 15.6
(footnotes on next page)
-3-
* Under 1%
(a) Of the 750,196 shares indicated as beneficially owned by Torchmark
Corporation ("Torchmark"), 187,500 shares are issuable pursuant to a
warrant issued to Torch Energy Advisors Incorporated ("Torch"), 21,507
shares are directly owned by Torch and 541,189 are owned by other
wholly owned subsidiaries of Torchmark.
(b) Jan Philipp F. Reemtsma and Joshua Ruch may be deemed to be the
beneficial owners of the shares held in the name of Alpine Investment
Partners. Messrs. Reemtsma and Ruch share voting and dispositive power
over 716,006 of such shares, and Mr. Ruch has sole voting and
dispositive power over 13,826 of such shares. Amount shown includes
1,242 shares beneficially owned by Mr. Ruch held in the name of XBF
Inc.
(c) Includes the shares owned by Torch and other subsidiaries of Torchmark
described in note (a). Mr. Bryan is an executive officer and director
of each of the Torchmark subsidiaries that beneficially own such shares
and he disclaims beneficial ownership of such shares. Also included are
121,720 shares which Mr. Bryan has the right to acquire, within 60
days, pursuant to options. Excludes 6,250 shares owned by Mr.
Bryan's wife as to which he has no voting or dispositive power.
(d) Includes 213,670 shares that Mr. Sere has the right to acquire within
60 days pursuant to vested incentive stock options. Does not include
6,000 shares owned by Mr. Sere's wife as to which he has no voting or
dispositive power.
(e) Includes 6,843 shares which the director has the right to acquire
within 60 days pursuant to options.
(f) Includes the shares owned by Torch described in note (a) and 50,000
shares that Mr. Watford has the right to acquire within 60 days
pursuant to options. Mr. Watford is an executive officer of each
of these corporations, and disclaims benefical ownership of such
shares.
(g) Includes 150,000 shares that Mr. Groves has the right to acquire
within 60 days pursuant to options. The remaining shares are owned by
CBGX, Inc., a corporation wholly owned by Mr. Groves.
(h) Includes 4,000 shares which the director has the right to acquire with
in 60 days pursuant to options.
(i) Includes the following: the shares beneficially owned by Messrs. Bryan
and Watford as described in notes (c) and (f); shares which directors
of the Company have the right to acquire pursuant to options, as
described in note (d), (e), (g) and (h); and 75,000 and 50,000 shares
that Kenneth W. Welch and Charles C. Green, III, respectively, have the
right to acquire within 60 days pursuant to options.
-4-
PROPOSAL I
ELECTION OF DIRECTORS
NOMINEES
Each incumbent director identified in the table below is a nominee for
election as a director of the Company. The term of office for which the
following persons are nominated will expire at the time of the 1996 Annual
Meeting of Stockholders of the Company or when their respective successors shall
have been elected and qualified. It is the intention of the persons named in the
accompanying proxy that proxies will be voted for the election of the eight
nominees named below unless otherwise indicated thereon. Should any nominee for
the office of director named herein become unable or unwilling to accept
nomination or election, the person or persons acting under the proxies will vote
for the election in his stead such other person as the Board of Directors may
recommend. The Board of Directors has no reason to believe that any of the
nominees will be unable to serve if elected to office and, to the knowledge of
the Board of Directors, the nominees intend to serve the entire term for which
election is sought. The Bylaws of the Company provide for the Board of Directors
to consist of no less than three and no more than nine members.
Directors will be elected by a majority vote of the shares of Common
Stock present, in person or by proxy, at the Annual Meeting. The Board of
Directors recommends a vote FOR each of the nominees listed and, unless marked
to the contrary, proxies received from a Stockholder will be voted for the
election of such nominees.
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information with respect to the nominees
for director, each of whom is currently a director, and present executive
officers of the Company and the Company's wholly owned subsidiary, Odyssey
Petroleum Company ("Odyssey"). Each executive officer has been elected to serve
until his successor is duly appointed or elected by the Board of Directors or
his earlier removal or resignation from office.
COMPANY
POSITION PRESENT
NAME AGE SINCE COMPANY POSITION
- -------------------- --- -------- ----------------------------------
J. P. Bryan 55 1987 Chairman of the Board
J. Darby Sere 48 1988 Director, President and
Chief Executive Officer
Charles C. Green III 49 1992 Vice President and
Assistant Secretary
Roland E. Sledge 50 1987 Vice President and Secretary
Michael B. Smith 34 1995 Vice President and Chief Financial
Officer
C. Barton Groves 57 1994 Director of the Company;
President of Odyssey
-5-
<PAGE>
COMPANY
POSITION PRESENT
NAME AGE SINCE COMPANY POSITION
- ------------------ --- -------- ----------------------------------
Kenneth W. Welch 38 1994 Vice President - Land of Odyssey
Dr. Jack Birks 75 1988 Director
Vincent H. Buckley 73 1987 Director
Habib Kairouz 29 1994 Director
A. K. McLanahan 69 1987 Director
Michael D. Watford 41 1994 Director
Mr. Bryan has been Chairman of the Board of the Company since August
31, 1987, and was Chief Executive Officer of the Company from June 30, 1994
to January 25, 1995. On January 25, 1995, Mr. Bryan became Chief
Executive Officer of Gulf Canada Resources Limited. He has been Chairman of
the Board of Nuevo Energy Company ("Nuevo") since March 1990 and was Chief
Executive Officer from March 1990 to January 1995. Mr. Bryan has also been
Chairman of the Board and Chief Executive Officer of Torch and its
predecessor since January 1, 1985. Mr. Bryan is a member of the Board of
Directors of Torchmark and Republic Waste Industries.
Mr. Sere has been Chief Executive Officer of the Company since January
25, 1995, President since March 7, 1988, and a director since March 25, 1988.
Mr. Sere was Chief Executive Officer of the Company from March 7, 1988, to June
29, 1994. He was a consultant with Patrick Petroleum Company, an independent oil
and gas company, from September 1987 to February 1988 and was a co-founder,
President, Chief Executive Officer and a director of Bayou Resources, Inc., an
independent oil and gas exploration and development company, from January 1982
until its acquisition by Patrick Petroleum Company in August 1987. Mr. Sere
served in various positions with Howell Corporation and Howell Petroleum
Corporation, an independent oil and gas company, from 1977 to 1981, the last of
which was Executive Vice President.
Mr. Green, Vice President and Assistant Secretary, has been an officer
of the Company since December 31, 1992, and of Torch since November 1992. He
currently serves as Vice Chairman and Chief Investment Officer of Torch. For
over ten years prior to joining Torch as the senior financial officer, Mr. Green
was President and Chief Operating Officer of Treptow Development Company, a real
estate development company. Previously, at J. P. Morgan Investment Management,
he was Vice President and Senior Portfolio Manager and Head of International
Fixed Income in London (1974-1982) and, in New York, was Assistant Vice
President in the Investment Department (1973-1974) and Investment Research
Officer and Energy Analyst (1969-1973).
Mr. Sledge, Vice President and Secretary of the Company since September
1, 1987, is Senior Vice President, Secretary and General Counsel of Torch and
has been an officer with Torch and its predecessor since July 1983. He was an
attorney with the law firm of Watt, White & Craig, Houston, Texas from 1980 to
1983.
-6-
Mr. Smith has been Vice President and Chief Financial Officer of the
Company since September 1995. He has also been Vice President and Chief
Financial Officer of Nuevo since September 1995. Mr. Smith joined Torch in
April 1995 as Vice President of Acquisitions and Financial Analysis and in
September 1995 became Torch's Chief Financial Officer. Prior to joining
Torch, Mr. Smith held various positions in finance with ARCO beginning
August 1989, the last of which was Financial Advisor in the Corporate Treasury
department.
Mr. Groves has been President of Odyssey and a director of the Company
since August 26, 1994. He was President of the managing general partner of
Odyssey Partners Ltd., the predecessor in interest of Odyssey (the "Odyssey
Partnership"), from 1986 to August 1994. Between 1973 and 1986, Mr. Groves held
various positions with Diamond Shamrock Corporation, including President of its
Diamond Shamrock Exploration Company subsidiary.
Mr. Welch has been Vice PresidentCLand of Odyssey since August 26,
1994. From 1987 to August 1994, Mr. Welch was Land Manager of the Odyssey
Partnership. Between 1979 and 1987, Mr. Welch held Area Landman and Senior
Landman positions with Enserch Exploration, Inc., Penn Resources, Inc., and
Moore McCormack Energy, Inc.
Dr. Birks has been a Director of the Company since 1988. He is
Chairman of the Board of North American Gas Investment Trust Plc. and
Midland & Scottish Resources Plc. He is life president of British Marine
Technology Limited. Dr. Birks served as Chairman of the Board of British
Marine Technology Limited from 1985 to 1995; as Chairman of the Board of
Charterhouse Petroleum Plc from 1982 to 1986; as Chairman of the Board of
London American Energy Inc. from 1982 to 1988; as Vice Chairman of the Board
of Petrofina (UK) Limited from 1986 to 1989; and as a director of George Wimpey
Plc, a construction company, from 1982 to May 1990.
Mr. Buckley has been a Director of the Company since 1987. He has been
Of Counsel to the law firm of Liddell, Sapp, Zivley, Hill & LaBoon since January
1989. He serves as a Director of Enron Cactus III Corporation, Houston, Texas,
an oil and gas company, and as a Director on the Houston Medical Area Advisory
Board of Texas Commerce Bank National Association. Mr. Buckley was President and
Chief Executive Officer of Cockburn Oil Corporation from August 1984 until
September 1, 1988, and was Vice President of Apache Corporation, an oil and gas
company, Denver, Colorado, from October 1982 to August 1984.
Mr. Kairouz has been a director of the Company since August 26, 1994.
Since December 1993 he has been employed by Rho Management Company, Inc., an
investment advisory firm which serves as advisor to the principal investor of
Alpine Investment Partners. Prior to that, Mr. Kairouz was employed for five
years in investment banking at the firms of Jesup & Lamont Securities, Inc. and
more recently, Reich & Co., Inc. Under the agreement pursuant to which the
Company acquired Odyssey, certain former owners ("Owners") of the Odyssey
Partnership acquired the right to designate one representative to the Company's
board of directors. Pursuant to such agreement, until the earlier to occur of
the five-year anniversary of the closing of such acquisition or the date such
Owners no longer own at least 5% of the outstanding Common Stock, the Company is
obligated to nominate and recommend to the Company's Stockholders one
representative of the Owners. Mr. Kairouz is the person so designated by the
Owners.
Mr. McLanahan has been a director of the Company since November 6,
1987. He has been a First Vice President of PaineWebber Incorporated since
January, 1995. He was a Vice President of Kidder Peabody & Co., Inc., an
investment banking firm from April 1985 until its sale to PaineWebber
Incorporated in 1995. From April 1982 to April 1985 he served as a Senior Vice
President and Branch Office Manager of Donaldson, Lufkin & Jenrette, Inc.,
Houston, Texas, an investment banking firm.
-7-
Mr. Watford has a been a Director of the Company since March 1994. He
has been Chief Executive Office of Nuevo since January 1995 and President, Chief
Operating Officer, and a member of the Board of Directors of Nuevo since
February 1994. He was President of Torch Energy Marketing, Inc., a subsidiary of
Torch, from 1990 until April 1995 and was Director of Natural Gas Marketing for
Meridian Oil, Inc. from 1985 until 1990. Mr. Watford was employed by Superior
Oil Company from 1981 until 1985 and Shell Oil Company from 1975 until 1981.
-8-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the past three
years cash compensation and certain other components of the compensation of J.
Darby Sere, the Company's President and Chief Executive Officer and C. Barton
Groves, President of Odyssey, who were the only officers of the Company in
fiscal 1995 whose total salary and bonus exceeded $100,000. All other executive
officers of the Company are also officers or employees of Torch and provided
services to the Company (including holding executive officer positions with
Company) pursuant to the Management Agreement between the Company and Torch (the
"Management Agreement"). Executive officers who perform services for the Company
under the Management Agreement received no compensation from the Company other
than the grant of stock options under the 1994 Stock Incentive Plan and were all
compensated primarily by Torch.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS PAYOUTS
- --------------------------------------------------------------- ----------------------- ----------------------
OTHER ALL
NAME AND ANNUAL RESTRICTED NUMBER OTHER
PRINCIPAL COMPENSA- STOCK OF LTIP COMPENSA-
POSITION YEAR SALARY BONUS TION(1) AWARD(S) OPTIONS PAYOUTS TION(2)
- ------------- ---- ------------ ------- --------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Darby
Sere
President 1995 $158,000 $0 $0 $0 234,450 $0 $8,450
1994 $147,000 $16,500 $0 $0 0 $0 $7,561
1993 $140,000(3) $0 $0 $0 0 $0 $995
C. Barton
Groves 1995 $125,000 $0 $0 $0 150,000 $0 $21,013
President of 1994 $0 $0 $0 $0 0 $0 $0
Odyssey 1993 $0 $0 $0 $0 0 $0 $0
</TABLE>
(1) These amounts do not include the value of the benefit to Mr. Sere of
the use of a Company-owned automobile used primarily for commuting to
the Company; the expense of a $7,110 per month disability insurance
policy under which Mr. Sere is the insured, the premiums of which are
paid by the Company; and the expenses of Mr. Sere's membership in
certain professional and athletic clubs. While some personal benefit
may be derived from the foregoing, the expenses are considered by the
Company to be ordinary, necessary and reasonable to its business and
such expenses did not exceed $10% of Mr. Sere's salary in fiscal 1995.
(2) Represents premiums paid on a $500,000 term life insurance policy for
Mr. Sere and an annual payment pursuant to a Simplified Employee
Pension Plan. Consists of $17,000 per year for personal benefit plans
paid to Mr. Groves in lieu of certain Company benefits and amounts paid
for a car allowance.
(3) Includes $2,000 paid by the Company as a guaranteed "IRA bonus".
-9-
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth the individual grants of options to
purchase Common Stock which were made during 1995 to the executive officers
named in the Summary Compensation Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION
NUMBER OF GRANTED PER SHARE FOR OPTION TERM(1)
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION ---------------------
NAME GRANTED IN 1995 PRICE DATE 5% 10%
- ------------- --------- ------------ --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
J. Darby Sere 25,000 5.6% $5.75 5/26/2005 $ 90,404 $ 229,101
C. Barton
Groves 150,000 33.3% $5.75 8/26/2004 $542,421 $1,374,603
C. Barton
Groves 15,000 3.3% $5.75 5/25/2005 $ 54,243 $ 137,461
</TABLE>
(1) In accordance with the rules of the Securities and Exchange Commission,
this column illustrates the gains that may exist for the respective
options assuming the price of the Company's Common Stock appreciates at
constant rates from the date of grant of an option until the expiration
of its term. This valuation model is hypothetical. The actual value, if
any, depends on the excess of the market price of the shares over the
exercise price on the date the option is exercised. If the market price
does not increase above the exercise price, compensation to the grantee
will be zero.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL-YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
The following table sets forth certain information concerning the
exercise in fiscal 1995 of options to purchase Common Stock by the executive
officers named in the Summary Compensation Table and the number and value of
unexercised options to purchase Common Stock held by such individuals at June
30, 1995. Also reported are the values for "in-the-money" options which
represent the positive spread between the exercise price of any such existing
stock options and the June 30, 1995 price of the Common Stock. The actual
amount, if any, realized upon exercise of stock options will depend upon the
market price of the Common Stock relative to the exercise price per share of
Common Stock at the time the stock option is exercised. There is no assurance
that the values of unexercised, "in-the-money" stock options reflected in this
table will be realized.
-10-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT JUNE 30, 1995 JUNE 30, 1995(1)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISES REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Darby Sere $0 $0 165,780 93,670 $96,502 $83,504
C. Barton
Groves $0 $0 150,000 15,000 $37,500 $3,750
</TABLE>
(1) Based upon $6.00, the closing price of Common Stock on June 30, 1995.
EMPLOYMENT ARRANGEMENTS
In connection with the Odyssey acquisition, the Company entered into a
two-year employment agreement (the "Employment Agreement") with Mr. Groves,
pursuant to which the Company agreed to employ Mr. Groves as President of
Odyssey, to appoint him a director of the Company and to nominate him as a
director at each annual meeting during the term of the Employment Agreement. Mr.
Groves will be paid a base salary of no less than $150,000 and was granted
options under the 1994 Stock Incentive Plan to purchase 150,000 shares of Common
Stock at the market price of the stock on the closing date of the Odyssey
acquisition. Mr. Groves is also entitled to a car allowance, to participate in
certain of the Company's employee benefit plans and to be paid an additional
$17,000 per year for personal benefit plans in lieu of certain Company benefits.
The Odyssey acquisition agreement initially obligated Odyssey to employ
Mr. Welch at a salary comparable to his salary at the former Odyssey
Partnership, and to permit him to participate in the Company's employee benefit
plans. Mr. Welch's continuing employment is at the discretion of the Board of
Directors.
LONG-TERM INCENTIVE PLAN-AWARDS IN LAST FISCAL YEAR
At this time, the Company does not have a long-term incentive plan for
its employees, other than the 1988 Non-Qualified Stock Option Plan and the 1994
Stock Incentive Plan.
1988 STOCK OPTION PLAN
In 1988, the Board of Directors and stockholders approved the Company's
1988 Non-Qualified Stock Option Plan ("1988 Plan"). The Company has reserved
131,325 shares of common stock under the 1988 Plan and no further options will
be granted under the plan. Options under the 1988 Plan may be granted by the
Compensation Committee to any director, executive officer or key employee of the
Company. The exercise price of an option is 100% of the fair market value on the
date of the grant. Options granted under the 1988 Plan may be exercised at any
time for up to 10 years from the date of grant but prior to termination of the
1988 Plan on March 25, 1998, or such shorter time as the Compensation Committee
determines.
1994 STOCK INCENTIVE PLAN
In 1994, the Board of Directors adopted the Bellwether Exploration
Company 1994 Stock Incentive Plan (the "1994 Plan"). The Company has reserved
825,000 shares of Common Stock under the 1994 Plan.
-11-
The 1994 Plan is administered by the Compensation Committee of the
Board of Directors. The Compensation Committee has full power to select, from
among the persons eligible for awards, the individuals to whom awards are
granted, to make any combination of awards to any participant and to determine
the specific terms of each grant, subject to the provisions of the 1994 Plan.
The option price per share of Common Stock deliverable upon the exercise of a
Stock Option shall be 100% of the fair market value of a share of Common Stock
on the date the Stock Option is granted.
Directors, officers and key employees of the Company and officers and
key employees of Torch who render services for the Company under the Management
Agreement are eligible to receive stock options or performance shares under the
1994 Plan. Members of the Board of Directors who are not employed by the Company
("Non-employee Directors") receive annual automatic grants of stock options.
INFORMATION CONCERNING THE OPERATION OF THE BOARD OF DIRECTORS
The small size of the Board of Directors lends itself to frequent
informal discussions of Company matters among its members. The Board of
Directors met formally six times and executed seven unanimous consents during
the fiscal year ended June 30, 1995.
The Company has a Compensation Committee comprised of Messrs. Birks,
McLanahan and Buckley (the "Compensation Committee"). The function of the
Compensation Committee is to administer the 1988 Stock Option Plan and the 1994
Stock Incentive Plan, to establish the compensation of the Company's President
and Chief Executive Officer and to review the compensation of the other
employees of the Company. The Compensation Committee generally meets quarterly
to review Torch's performance under the Management Agreement. See "Transactions
with Related Parties - Management Agreement." The Management Agreement may be
terminated by the Compensation Committee, as provided in the Management
Agreement. The Company formed an Audit Committee in March 1995. The Audit
Committee is composed of Messrs. McLanahan and Buckley and Dr. Birks. The
primary function of the Audit Committee is to review the annual audit of the
Company's financial statements with the Company's independent accountants. The
Audit Committee did not meet during fiscal 1995. During fiscal 1995, each
director attended at least 75% of the total number of meetings of the Board of
Directors, and the total number of meetings held by all Committees on which he
served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee are Messrs. Birks,
Buckley and McLanahan. The service of these individuals on the Compensation
Committee does not create any corporate interlocks or insider participation
between the Company's Compensation Committee and another entity.
-12-
COMPENSATION OF DIRECTORS
Directors of the Company who are neither officers nor employees of the
Company or Torch received $2,000 per meeting of the Board of Directors attended
during the fiscal year ended June 30, 1995, and were reimbursed for reasonable
expenses incurred in attending such meetings. Directors who are officers or
employees of the Company or Torch did not receive any additional compensation
for services as members of the Board of Directors. The Company paid a total of
$32,000 in director fees for the fiscal year ended June 30, 1995. Each
non-employee board member also receives an annual grant of 2,000 options under
the 1994 Plan.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee, a committee of the Board of Directors, is
responsible for establishing policies concerning the compensation of the
Company's executive officers. The report of the Compensation Committee
describing the Company's compensation philosophy and objectives is presented
below.
COMPENSATION COMMITTEE REPORT
As members of the Compensation Committee, we are responsible for
administration of the Company's 1988 Non-Qualified Stock Option Plan and the
1994 Stock Incentive Plan. We also evaluate compensation levels of management
and review with the Board of Directors the various factors affecting
compensation of the Company's highest paid officers. In addition, the
Compensation Committee considers management succession and related matters.
The Compensation Committee has reviewed the compensation for J. Darby
Sere, the President and Chief Executive Officer of the Company, and C. Barton
Groves, President of Odyssey, for 1995 and has concluded that each of their
compensation was reasonable in view of the Company's performance and their
respective contributions to that performance. Generally, such compensation was
comprised of three elements: (1) base compensation; (2) incentive bonus; and (3)
stock options.
The Committee continues to endorse the compensation policy of the
Company, which is that a substantial portion of the annual compensation of each
officer must be related to the performance of the Company, as well as the
particular contribution of each officer.
The specific bonus an executive receives is dependent on individual
performance and level of responsibility. Assessment of the officer's relative
performance is made annually based on a number of factors which include
initiative, business judgement, technical expertise, and management skills. For
purposes of determining compensation, the Compensation Committee also considers
the Company's performance compared with its performance in the previous year as
well as the status of goals set by the Company at the beginning of each year.
For 1995, as compared to 1994, the Compensation Committee noted an 80%
increase in revenues, an 88% increase in operating cash flows, and a 16%
increase in the Company's net income.
As provided for in the Management Agreement between the Company and
Torch, all of the salary and bonus of J.P. Bryan, Chairman of the Board and
Michael D. Watford, a Director, are paid by Torch Energy and Nuevo and all of
the salary and bonus of Roland E. Sledge, Vice President and Secretary, Michael
B. Smith, Vice President and Chief Financial Officer and Charles C. Green, III,
Vice President and Assistant Secretary, are paid for by Torch.
-13-
J. Darby Sere was granted a salary increase of $12,000, for a total base
salary of $162,000 per year in 1995. This increase was paid as a result of Mr.
Sere's overall leadership of the Company, and in particular, his efforts in
locating, evaluating, negotiating and closing the two significant acquisitions
for the Company in 1995.
The Committee believes that stock options serve as important long term
incentives for executive officers of the Company by encouraging their continued
employment and commitment to the performance of the Company. Moreover, the
Committee believes that stock options are an excellent means to align the
interests of the Company's officers with those of its stockholders.
The numbers of options that the Compensation Committee grants to
executive officers is based on individual performance and level of
responsibility. In addition, the Committee strives to grant options at a level
sufficient to provide a strong incentive for executives to work for the
long-term success of the business. The Committee does not consider the number of
options currently held by an executive in determining individual grants since
such a factor would create an incentive to exercise options and sell the shares.
On May 26, 1995, Messrs. Sere and Groves were considered for and
granted options to purchase 25,000 and 15,000 shares, respectively. The grants
of stock options to Messrs. Sere and Groves were made in recognition of Mr.
Sere's efforts in locating, evaluating, negotiating and closing the two
significant acquisitions for the Company in 1995 and Mr. Groves efforts in
leading the Fausse Pointe 3-D seismic project.
The main elements of the Company's compensation policy--base salary,
bonus and stock options--constitute an appropriate reward for the short and
long-term efforts of the Company's executives. The Committee is devoted to the
continual evaluation of the compensation of the executive officers of the
Company and its principal subsidiaries in order to support the future
development of the Company and growth in stockholder value.
Dr. Jack Birks
Vincent H. Buckley
Alexander K. McLanahaN
-14-
TRANSACTIONS WITH RELATED PERSONS
RELATIONSHIP WITH TORCH
MANAGEMENT AGREEMENT. The Company has been managed by Torch since 1987.
Torch, headquartered in Houston, Texas, is primarily engaged in the business of
providing management and advisory services relating to oil and gas assets for
institutional and public investors. As of December 31, 1994, Torch managed
assets with an historic acquisition price of approximately $1.3 billion. The
Management Agreement, which was amended effective January 1, 1994, is subject to
termination by the Compensation Committee of the Board of Directors of the
Company, upon twelve months notice. The current term of the Management Agreement
expires on December 31, 2002. Thereafter, the agreement renews automatically for
successive one-year periods until terminated by either party.
The Management Agreement requires Torch to administer the business
activities of the Company for a monthly fee equal to (i) one-twelfth of two
percent of the book value of the Company's assets, excluding cash and cash
equivalents, at the end of such month, plus (ii) two percent of operating cash
flows during such month. These administrative services include providing the
Company with office space, equipment and supplies, retaining and managing
accounting, legal, financial, geological, engineering, technical and insurance
professionals as needed by the Company, maintaining the books and records of the
Company, assisting the Company in determining its capital requirements,
preparing any reports or other documents required by governmental authorities,
analyzing economic and other data related to the Company's business and
otherwise providing general management services and advice to the Company's
business. The Company has agreed to indemnify Torch and its affiliates for
liabilities incurred by Torch or its affiliates for actions taken under the
Management Agreement, other than acts of fraud, willful misconduct or gross
negligence of Torch or its affiliates or any of their employees. The Company
presently intends to continue to operate under the Management Agreement and,
other than the personnel employed by Odyssey, does not presently intend to
develop a substantial staff of administrative and management personnel. The
executive officers of the Company (with the exception of the President) who are
also officers or employees of Torch provide services to the Company pursuant to
the Management Agreement and are compensated solely by Torch without
reimbursement by the Company. The salary of the President is paid by the
Company.
The Company believes that the terms and fees under the Management
Agreement are comparable with those that would result from the negotiation of an
arm's length third-party transaction and are fair to the Company. The Management
Agreement was amended effective January 1, 1994 and contains a fee structure
different from that used in prior agreements. See "Prior Management Agreement."
If the Management Agreement had been in effect during the fiscal years ended
June 30, 1993 and 1994, the amount payable under the Management Agreement for
administrative services would have been $268,000 and $610,000, respectively.
Under the Management Agreement, the monthly fee for administrative
services does not apply to investing and financing services that Torch may
provide, at its discretion, to the Company upon the Company's request. For such
investing and financing services the Company pays Torch a fee for the Torch
employees providing such services on an hourly basis, and certain overhead
expenses with respect to such employees and any related expenses. If the
Management Agreement had been in effect during the years ended June 30, 1993 and
1994, the Company would have paid Torch $14,318 and $20,000, respectively, for
investing and financing services.
The monthly fee under the Management Agreement also does not include
fees for extraordinary investing and financing services, such as bridge
financing and merger and acquisition services, that Torch provides to the
Company in connection with certain substantial acquisition or financing
transactions.
-15-
The Company believes that its working association with Torch significantly
enhances the Company's access to capital markets and the number of acquisition
prospects to which the Company is exposed and allows the Company to compete for
acquisition prospects with greater developmental potential. The Company believes
its access to Torch's staff provides accounting, financial, technical and
management resources that a business of the Company's size might not otherwise
be able to afford.
In the course of its business, Torch generates potential investments in
oil and gas properties, processing plants, gathering systems and pipelines, and
other oil and gas assets (collectively "Investments"). Under various partnership
and other agreements in which Torch has an interest (the "Institutional Program
Agreements"), Torch is required to offer first to certain institutional
partnerships and other institutional investors, including subsidiaries of
Torchmark (collectively, the "Institutional Programs"), Investments that meet
certain criteria set forth under such agreements. Torch also manages Nuevo.
Under the Management Agreement and Nuevo Management Agreement, Torch is required
to offer to the Company and Nuevo all Investments (i) that are not within the
investment parameters of the Institutional Programs, (ii) that the Institutional
Programs elect not to pursue and (iii) that are within the scope of the
Company's or Nuevo's business. The Institutional Programs may dispose of or
farmout Investments, and the Company will not have any preferential right to
acquire such Investments. The Company has reviewed the investment criteria of
the Institutional Programs and believes that they generally are not competitive
with the Company's business and acquisition strategy. No assurances can be made
that the investment criteria of Institutional Programs formed by Torch in the
future will not compete with the Company's acquisition strategy or that
Institutional Programs will not acquire Investments that the Company would
otherwise propose to acquire.
The business and acquisition strategy of the Company and Nuevo are
anticipated to overlap regarding certain Investments. The Company, Nuevo and
Torch have adopted a policy regarding the rights as between Nuevo and the
Company to Investments generated by Torch that Torch is required to offer to the
Company and Nuevo. If an Investment is located in the Company's Area of
Exclusive Interest (as hereinafter defined), the Investment will be offered
first to the Company. If an Investment is located in Nuevo's Area of Exclusive
Interest, the Investment will be offered first to Nuevo. Investments located
outside of or in both the Areas of Exclusive Interest will be offered by Torch
to both the Company and Nuevo. Unless the Company and Nuevo agree otherwise, the
Company will be entitled to acquire a 20% interest in the assets representing
the Investment, and Nuevo will be entitled to acquire the remaining 80%. With
respect to assets that form part of an Investment which is not capable of
division, Torch will allocate such assets between Nuevo and the Company in a
manner deemed fair and reasonable by Torch, whose decision shall be final and
binding.
The Company's Area of Exclusive Interest is defined as (i) for
Investments in an oil and gas property, any geographic area which produces from
the same formation as the proposed Investment and in which the Company owns
proved reserves with a discounted present value of future net cash flows of
$500,000 or more, and (ii) for Investments that are not an oil and gas property,
any area in which the Company owns a non-oil and gas property investment with a
book value of over $100,000. Nuevo's Area of Exclusive Interest is defined as
(i) for Investments in an oil and gas property, any geographic area which
produces from the same formation as the proposed Investment and in which Nuevo
owns proved reserves with a discounted present value of future net cash flows of
$5 million or more, and (ii) for Investments that are not an oil and gas
property, any area in which Nuevo owns a non-oil and gas property investment
with a book value of over $1 million.
The Company will continue to generate its own investments in the
future, and neither Torch nor Nuevo will have any right to participate in such
investments. The decision to accept an Investment generated by Torch will be
made by the Company's management and Board of Directors, some of whom are
members of Torch's executive management. The Compensation Committee of the Board
of Directors, which is composed of persons who are not employees of Torch or the
Company, will meet quarterly to review Torch's performance under the Management
Agreement.
-16-
Torch also invests in oil and gas assets for its own account and may do so
in the future. In accordance with the Management Agreement, Torch may not
acquire an Investment within the scope of the Company's business and acquisition
strategy without first offering such Investment to the Company pursuant to the
criteria set forth above.
PRIOR MANAGEMENT AGREEMENT. Prior to January 1, 1994, the fee for
administrative services under the management agreements was a fixed amount, plus
for services related to certain SEC filings and tax reporting, a fee based on
the salaries of the Torch employee rendering the services, on an hourly basis,
and certain related overhead expenses for such employees. During the fiscal
years ended June 30, 1993, 1994, and 1995, the Company paid Torch fees for these
services of $452,000, $637,000 and $1,196,000, respectively. Under the
management arrangements in effect prior to January 1, 1994, the Company paid
Torch a fee for acquisitions originated by Torch equal to a percentage of the
value of the acquisition price. No payments were made for these services during
fiscal year 1993. During the year ended June 30, 1994, in connection with the
AGRI Acquisition, the Company issued Torch a warrant to purchase 187,500 shares
of common stock for $6.40 per share in lieu of cash payments incurred under the
management agreement with respect to such transaction.
PENDING SALE. Torch is currently an indirect, wholly owned subsidiary
of Torchmark, a financial services and insurance holding company. In March 1995,
Torchmark and Summit entered into a letter of intent pursuant to which Torchmark
agreed to sell substantially all of the business of Torch to a corporation to be
formed by Summit and management of Torch. Following the consummation of such
transaction, Torchmark would continue to own 10% of Torch's outstanding common
stock. Closing of such transaction, however, is subject to the fulfillment of
several conditions, including the results of a due diligence review and the
acquisition of acceptable financing and regulatory approval. No assurance can be
given that such transaction will be consummated.
OTHER RELATIONSHIPS WITH TORCH. Torch markets a portion of the oil and
natural gas production for certain properties in which the Company owns an
interest. The Company is charged a fee of 2% of revenues for natural gas
marketed and a fee based on the difference between the posted and sales price of
oil and for oil marketed. For fiscal years ending June 30, 1993, 1994, and 1995,
such charges amounted to $5,000, $3,000, and $12,000, respectively. The Company
believes such fees were fair to the Company.
Torch began operating the Gas Plant in December 1993 pursuant to an
operating agreement with the Company and other interest owners in the Gas Plant.
The amount paid to Torch in connection with such operations during the seven
months ended June 30, 1994 and the year ended June 30, 1995, were $39,000 and
$71,000, respectively.
Certain officers and directors of the Company are also officers or
employees of Torch.
CERTAIN ACQUISITIONS. A joint venture 90% owned by the Company (the
"Company Venture") acquired 7.6% and 23.3% interests in the Snyder Plant and the
Diamond M Plant, respectively, in July 1993. The interests were acquired for
$8.45 million. The other partner in the Company Venture is not affiliated with
the Company or Torch. In a simultaneous transaction, a joint venture 90% owned
by Torch (the "Torch Venture") acquired 4.1% and 12.5% interests in the Snyder
Plant and Diamond M Plant, respectively, for $4.55 million. In December 1993,
Torch sold its interests in the Torch Venture to Associated Gas Resources, Inc.
("AGRI") for a promissory note in the amount of $4.55 million, which bore
interest at 7% per annum. Thereafter, in December 1993, the Company acquired
AGRI by merger. In March 1994, the Company repaid the $4.55 million note to
Torch with borrowings under an existing credit facility.
The Company acquired AGRI by merger in December 1993. Under the terms
of the management agreement in effect at that time, Torch became entitled to
consideration equal to 2.5% of the consideration paid to the shareholders of
AGRI. In lieu of this fee, the Company issued Torch a warrant to purchase
187,500 shares of Common Stock for $6.40 per share. The warrant is exercisable
at any time prior to December 31, 1998.
-17-
Prior to its acquisition by the Company, since February 1, 1992, AGRI
had been managed by Torch. During the fiscal years ending June 30, 1992, 1993,
and 1994, AGRI paid Torch management fees of $150,000, $661,357 and $300,000,
respectively.
In connection with the merger of AGRI into the Company, AGRI issued
650,000, 150,000, 150,000 and 50,000 shares of its common stock to Torch, Mr.
Bryan, Mr. Watford and an employee of Torch, respectively. In connection with
the Company's acquisition of AGRI, the shares owned by Torch, Mr. Bryan, Mr.
Watford and the employee were converted into 54,151, 12,497 and 12,497 shares of
Common Stock, and $25,000, respectively.
ALABAMA FERRY ACQUISITION. In 1992, the Company acquired a working
interest in the Alabama Ferry North Unit and Torch acquired a net profits
interest carved out of the working interests. Torch resold its net profits
interest to Institutional Programs at the same price as Torch originally
acquired the net profits interest. In connection with the sale to the
Institutional Programs, Torch received a fee of $505,000 including the
reimbursement of $70,000 in costs.
PURCHASES FROM AND SALES TO NUEVO. During fiscal 1993 the Company sold
undeveloped acreage to Nuevo for $62,500, which amount represented the Company's
investment costs in such acreage. During fiscal years 1992, 1993, and 1994, the
Company acquired interests in four exploratory prospects from Nuevo for an
aggregate cost of $142,595 on the same terms as interests in such prospects were
acquired by unaffiliated persons.
MINING VENTURES. During fiscal year 1992, the Company acquired an
average 24.4% interest in three mining ventures (the "Mining Ventures") from an
unaffiliated person for $128,500. At the time of such acquisition, Mr. Bryan,
his brother and Robert L. Gerry, a director and executive officer of Nuevo (the
"Affiliated Group"), owned an average 21.5% interest in the Mining Ventures. The
Company's interest in the Mining Ventures increased as it paid costs of the
venture. As of March 31, 1994, the Company had invested $270,000 in the Mining
Ventures and its interest had increased to 32.5% and the interest of the
Affiliated Group decreased to 13.4%. The Company does not intend to fund
additional material costs of the Mining Ventures.
ODYSSEY MERGER. In connection with the Odyssey Merger, the former
owners of Odyssey assigned approximately 5% of the consideration to the then
current management of Odyssey, all of whom became employees of the Company
following the acquisition. Pursuant to this agreement, a corporation owned by
Mr. Groves received 20,625 shares of Common Stock and $123,750 and Mr. Welch
received 10,312 shares of Common Stock and $61,875. The former owners of Odyssey
also formed a new partnership ("New Odyssey") and transferred to it interests in
certain prospects formerly owned by Odyssey. Messrs. Groves and Welch received a
2.25% and 1.125% interest, respectively, in New Odyssey. Certain subsidiaries of
Torchmark which own Common Stock have agreed with Odyssey's former owners that
if the Torchmark subsidiaries sell Common Stock in certain transactions, such
subsidiaries will arrange for the sale of the Common Stock held by the former
owners of Odyssey on the same basis as the Torchmark subsidiaries' shares are
sold. Additionally, former owners of Odyssey have been granted registration
rights with respect to such shares.
3DX. Odyssey has entered into an agreement with 3DX pursuant to which
Odyssey grants an election for 3DX to participate in every 3-D seismic prospect
generated by Odyssey. Nuevo owns a 27% interest in a partnership that owns a 10%
interest in 3DX.
HAMPTON ACQUISITION. In connection with the purchase of 7,500 shares of
Hampton Preferred Stock from R. Chaney & Partners ) 1993, L.P. (the "Chaney
Partnership"), the Company agreed to indemnify and hold harmless the Chaney
Partnership and its affiliates from any expenses to which they may become
subject, to the extent arising out of the Company's purchase of such shares of
Hampton Preferred Stock. One of the limited partners in the Chaney Partnership
is Nuevo. The Company also agreed to reimburse the Chaney Partnership and its
affiliates for any reasonable legal or other expenses incurred by them in
connection with investigating or defending any claims
-18-
giving rise to a right to indemnification. In addition, the Company agreed to
reimburse the Chaney Partnership for legal fees (not to exceed $2,000) incurred
by it in connection with the sale of such shares of Hampton Preferred Stock.
COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file with the Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than ten percent Stockholders are
required by the Commission's regulations to furnish the Company with copies of
all Section 16(a) forms they filed with the Commission.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended June 30, 1995, the Company's
officers, directors and greater than ten percent Stockholders had complied with
all Section 16(a) filing requirements.
-19-
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
Company's cumulative total stockholder return on its Common Stock (assuming
reinvestment of dividends at a date of payment into Common Stock of the Company)
to the cumulative total return on the NASDAQ Market Index ("Broad Market") and
the cumulative total return on the Dow Jones Secondary Oil Index ("Industry
Index") from June 30, 1990 until present.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY AND BROAD MARKET
FISCAL YEAR ENDING
----------------------------------------------------
COMPANY 1990 1991 1992 1993 1994 1995
- ------- ---- ----- ------ ------ ------ ------
BELLWETHER EXPLORATION 100 78.13 81.25 109.38 140.63 150.00
INDUSTRY INDEX 100 91.97 85.58 103.01 99.60 104.17
BROAD MARKET 100 94.22 101.52 124.62 136.66 160.27
-20-
PROPOSAL II
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Stockholders will be asked to ratify the appointment of Deloitte &
Touche, LLP as independent auditors of the Company and its subsidiaries for the
current fiscal year ending June 30, 1996.
The Board of Directors of the Company approved the engagement of the
accounting firm of KPMG Peat Marwick ("KPMG") as the independent auditors to the
Company for the fiscal year ended June 30, 1993. The Company terminated the
engagement of KPMG as the Company's principal independent accountants
responsible for auditing all of the Company's financial statements, effective on
or about June 13, 1994. This decision was influenced by the merger of the
Company with AGRI on December 31, 1993. Deloitte & Touche, LLP previously
audited the financial statements of AGRI.
The decision to change accountants was not based upon a formal
recommendation of the Board of Directors. However, certain directors
participated in the decision process.
KPMG's reports on the Company's financial statements for the fiscal
year ended June 30, 1993 contained no adverse opinion or a disclaimer of opinion
nor was such report qualified or modified as to uncertainty, audit scope or
accounting principles. The Company believes that during its fiscal year ended
June 30, 1993 and the subsequent interim periods, there was, with regard to
KPMG, neither any disagreement of the type described in Item 304(a)(1)(iv) of
Regulation S-K nor any reportable event of the type described in Item
304(a)(1)(v) of Regulation S-K. KPMG has stated in a letter to the Commission
that it agrees with the Company's assertions set forth in this paragraph.
The engagement of Deloitte & Touche, LLP as independent auditors of the
Company is subject to approval by a majority of the shares of Common Stock
present, in person or by proxy, at the Annual Meeting.
A representative of Deloitte & Touche, LLP will be present at the
Annual Meeting with an opportunity to make a statement if the representative so
desires and will be available to respond to appropriate questions.
MANAGEMENT RECOMMENDS THAT THE STOCKHOLDERS APPROVE AND RATIFY THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS OF THE COMPANY
AND ITS SUBSIDIARIES FOR THE FISCAL YEAR ENDING JUNE 30, 1996. PROXIES
RECEIVED BY THE COMPANY WILL BE SO VOTED UNLESS A CONTRARY VOTE IS SPECIFIED.
-21-
STOCKHOLDERS' PROPOSALS FOR 1996 ANNUAL MEETING
Proposals of Stockholders of the Company that are intended to be
presented at the 1996 Annual Meeting of the Stockholders of the Company must be
received by the Secretary of the Company not less than 120 days in advance of
the one year anniversary of the date of the 1995 Annual Meeting. Such proposals
must be in conformity with all applicable legal provisions including Rule 14a-8
of the General Rules and Regulations under the Exchange Act and the Bylaws of
the Company.
OTHER MATTERS
The cost of soliciting proxies, including the cost of preparing and
mailing this Proxy Statement and the expenses incurred by brokerage houses
nominees and fiduciaries in forwarding proxy materials to beneficial owners,
will be borne by the Company. In addition to solicitation by mail, certain
directors, officers and regular employees of the Company may solicit the return
of proxies by telephone, telecopy, fax telegram or personal interview. Such
persons will receive no additional compensation for such services. In addition,
the Company has retained Automatic Data Processing to assist in soliciting
proxies for a fee of $0.70 per proxy solicited plus out-of-pocket expenses. At
such rate their fee for handling the 1995 proxies will be about $1,800.
The Board of Directors has no information that any matters other than
those referred to in this Proxy Statement will be brought before the Annual
Meeting. If, however, other matters should properly come before the meeting, the
accompanying proxy confers discretionary authority on the persons named therein
to vote it in accordance with the recommendations of the Board of Directors.
By Order of the Board of
Directors
Roland E. Sledge
Secretary
October 17, 1995
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED JUNE 30, 1995 ARE AVAILABLE AT NO COST TO THE STOCKHOLDERS OF THE COMPANY
UPON WRITTEN REQUEST TO ROLAND E. SLEDGE, SECRETARY OF THE COMPANY, 1221 LAMAR
STREET, SUITE 1600, HOUSTON, TEXAS 77010-3039.
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