SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Section 240.14a-11(c) or Section 240.14a-12
AMERICAN 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) of 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 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:
AMERICAN EXPLORATION COMPANY
April 19, 1996
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
American Exploration Company ("American") to be held at 10:00 a.m. on Tuesday,
May 21, 1996 at The Four Seasons Hotel, 1300 Lamar, Houston, Texas.
At the meeting, you will be asked to consider and vote upon (1) the
election of nine directors; (2) the approval of the appointment of American's
independent public accountants; and (3) such other business as may properly come
before the meeting or any adjournment thereof.
We hope you will find it convenient to attend in person. Whether or not you
expect to attend, to assure representation at the meeting and the presence of a
quorum, please date, sign and promptly mail the enclosed proxy in the return
envelope provided.
A copy of American's 1995 Annual Report to Stockholders is also enclosed.
Sincerely,
/s/ MARK ANDREWS
Mark Andrews
Chairman of the Board
and Chief Executive Officer
AMERICAN EXPLORATION COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1996
TO THE STOCKHOLDERS OF
AMERICAN EXPLORATION COMPANY:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of American
Exploration Company ("American") will be held at The Four Seasons Hotel, 1300
Lamar, Houston, Texas on Tuesday, May 21, 1996 at 10:00 a.m. for the following
purposes:
(1) to elect nine members to the Board of Directors for the ensuing year;
(2) to approve the appointment of Arthur Andersen LLP as independent
public accountants of American for 1996; and
(3) to transact such other business as may properly come before the
meeting.
American has fixed the close of business on March 22, 1996 as the record
date for determining stockholders entitled to notice of, and to vote at, such
meeting or any adjournment thereof.
You are cordially invited to attend the meeting in person. Even if you plan
to attend the meeting, you are requested to mark, sign, date and return the
accompanying proxy as soon as possible.
By Order of the
Board of Directors
/s/ T. FRANK MURPHY
T. Frank Murphy
Secretary
April 19, 1996
1331 Lamar
Houston, TX 77010-3088
AMERICAN EXPLORATION COMPANY
1331 LAMAR, SUITE 900
HOUSTON, TEXAS 77010-3088
(713) 756-6000
------------------------
PROXY STATEMENT
------------------------
The accompanying proxy is solicited by the Board of Directors of American
Exploration Company ("American" or the "Company"), a Delaware corporation, to be
voted at the Annual Meeting of Stockholders of American to be held on Tuesday,
May 21, 1996 (the "Annual Meeting"), at the time and place and for the purposes
set forth in the accompanying Notice of Annual Meeting of Stockholders and at
any adjournment thereof.
This proxy statement and the accompanying proxy card are being mailed to
stockholders on or about April 23, 1996. In addition to the solicitation of
proxies by mail, regular officers and employees of American may solicit the
return of proxies by mail, telephone, telegram or personal contact. American
will pay the cost of soliciting proxies in the accompanying form. American will
reimburse brokers or other persons holding stock in their names or in the names
of their nominees for their reasonable expenses in forwarding proxy material to
beneficial owners of stock. American has retained Morrow & Co. to perform
solicitation services in connection with this proxy statement. For such
services, Morrow & Co. will receive a fee of up to $10,000 and will be
reimbursed for certain out-of-pocket expenses and indemnified against certain
liabilities incurred in connection with this proxy solicitation.
VOTING
Holders of the Company's Common Stock, $.05 par value per share (the
"Common Stock"), and the Depositary Shares ("Depositary Shares"), each
representing a 1/200 interest in a share of $450 Cumulative Convertible
Preferred Stock, Series C ("Convertible Preferred Stock") of American, as of
March 22, 1996, the record date for determining persons entitled to notice of,
and to vote at, the Annual Meeting, are entitled to vote on all matters at the
Annual Meeting. Each share of Common Stock entitles the holder to one vote, and
each Depositary Share entitles the holder to 1.6667 votes (the number of shares
of Common Stock into which a Depositary Share may be converted upon regular
conversion at the current conversion price of $15.00 per share), on each matter
submitted to a vote of the stockholders. The holders of shares representing a
majority of the votes of the issued and outstanding stock and entitled to vote,
present in person or represented by proxy, constitute a quorum for the meeting.
As of March 31, 1996, American had outstanding and entitled to vote 11,812,483
shares of Common Stock and 800,000 Depositary Shares convertible into 1,333,333
shares of Common Stock.
All duly executed proxies received prior to the Annual Meeting will be
voted in accordance with the choices specified thereon and, in connection with
any other business that may properly come before the meeting, in the discretion
of the persons named in the proxy. As to any matter for which no choice has been
specified in the proxy, the shares represented thereby will be voted by the
persons named in the proxy, to the extent applicable, (1) for the election as a
director of each nominee listed herein; (2) for the appointment of Arthur
Andersen LLP as independent public accountants of American for 1996; and (3) in
the discretion of such persons in connection with any other business that may
properly come before the meeting. A stockholder giving a proxy may revoke it at
any time before it is voted at the Annual Meeting by delivering written notice
of revocation to the Secretary of American or by delivering a properly executed
proxy bearing a later date. Proxies indicating stockholder abstentions will be
counted for purposes of determining whether there is a quorum at the Annual
Meeting, but will not be voted on any matter and, therefore, except in the case
of director elections, will have the same effect as a vote against the matter.
Shares represented by "broker non-votes" (I.E., shares held by brokers or
nominees that are represented at a meeting, but with respect to which the broker
or nominee is not empowered to vote on a particular proposal) will be counted
for purposes of determining whether there is a quorum at the Annual Meeting, but
will not be voted on any matter and will not be included for purposes of
determining the aggregate voting power or number of votes cast at the Annual
Meeting. A stockholder who attends the Annual Meeting may, if he or she wishes,
vote by ballot at the Annual Meeting and such vote will cancel any proxy
previously given. Attendance at the Annual Meeting will not in itself, however,
constitute the revocation of a proxy.
1
ELECTION OF DIRECTORS (PROPOSAL NO. 1)
It is intended that the persons named below will be placed in nomination
for election as directors at the Annual Meeting and that persons named in the
proxy will vote in favor of such nominees unless authority to vote in the
election of directors is withheld. The terms of office of the directors will be
until the next annual meeting of stockholders and until their successors are
elected and qualified. The persons named in the proxy may act with discretionary
authority in the event any nominee should become unavailable for election,
although management is not aware of any circumstances likely to render any
nominee unavailable or unable to continue to serve. Each of the nominees is a
current director of American. The affirmative vote of a plurality of the total
votes cast is required for the election of directors.
NAMES AND BUSINESS EXPERIENCE OF THE NOMINEES
<TABLE>
<CAPTION>
Director
Name Principal Occupation During Past Five Years Age Since
- ---- ------------------------------------------- --- --------
<S> <C> <C> <C>
Mark Andrews Chairman of the Board and Chief Executive Officer 45 1980
of American (1)
Harry W. Colmery, Jr. Vice President, Capital Guardian Trust Company 72 1990
of Los Angeles (2)
Irvin K. Culpepper, Jr. Vice President, Kelso & Company, a merchant 47 1989
banking firm engaged in the leveraged buyout
business (3)
Walter J.P. Curley, Jr. Venture capital investments (4) 73 1993
Phillip Frost, M.D. Chairman of the Board and Chief Executive Officer 59 1983
of IVAX Corporation, a pharmaceutical, medical
diagnostic and specialty chemical company (5)
Peter G. Gerry Managing Director of Sycamore Management 50 1983
Corporation, an investment management firm (6)
H. Phipps Hoffstot, III Private investor (7) 39 1983
John H. Moore Petroleum consultant (8) 70 1989
Peter P. Nitze Chairman of Nitze-Stagen & Company, Inc., a real 60 1983
estate and financial consulting firm (9)
</TABLE>
- ------------
(1) Mr. Andrews is also a director of IVAX Corporation.
(2) Mr. Colmery has been Vice President of Capital Guardian Trust Company of
Los Angeles since 1986.
(3) Mr. Culpepper joined Kelso & Company in 1988. From 1986 to 1988, he was
Vice President in charge of Private Finance for New York Life Insurance
Company. Mr. Culpepper is also a director of Pepper Co., Inc. and is a
director of the New York City Industrial Development Agency.
(4) Ambassador Curley was Ambassador to France from 1988 to 1992 and Ambassador
to Ireland from 1974 to 1977. He is Principal of W.J.P. Curley, a venture
capital company. After serving as Ambassador to France, Ambassador Curley
was reappointed a director of American in March 1993, having previously
served as a director of American from 1982 to 1988. Ambassador Curley is
also a director of Sothebys Inc. and France Growth Fund, an advisory
director to Paribas International and Trustee of the Frick Collection in
New York City.
2
(5) Dr. Frost has been Chairman of the Board and Chief Executive Officer of
IVAX Corporation since March 1987. He is the Vice Chairman of the Board of
Directors of North American Vaccine, Inc. Dr. Frost was also Chairman of
the Department of Dermatology of Mount Sinai Medical Center of Greater
Miami from 1972 to 1990. He is also a director of NAPRO Therapeutics, Inc.
and Whitman Education Group, Inc. Dr. Frost is a trustee of the University
of Miami and a governor of the American Stock Exchange.
(6) Mr. Gerry is also Chairman of Seven Up/RC Bottling Company of Southern
California, Inc. and is a former President of Citicorp Venture Capital Ltd.
and director of Pond Hill Homes, Ltd.
(7) Mr. Hoffstot is also Chief Financial Officer of Pittsburgh History &
Landmarks Foundation and subsidiaries.
(8) Mr. Moore was Chairman of the Board and Chief Executive Officer of Ladd
Petroleum Corporation from 1986 to 1988. He is also a former director of
First Interstate Bank of Denver and is a former director of General
Atlantic Resources.
(9) Mr. Nitze is also a Chairman of Nitze, Stagen & Co., Inc. (New York and
Washington).
COMPENSATION OF DIRECTORS
Each director, other than Mr. Andrews, received compensation of $2,000 per
year for his services as a member of the Board of Directors. Effective July
1995, this amount was increased to $10,000 per year payable quarterly beginning
with the third quarter of 1995. In addition, each director, other than Mr.
Andrews, receives $1,000 for each Board or Committee meeting attended and is
reimbursed for certain expenses incurred in attending meetings of the Board of
Directors and committees thereof. Each Committee chairman also receives $10,000
per year payable quarterly.
In addition, each director, other than Mr. Andrews, receives an initial
award of 2,500 stock options in his initial year of service, and receives annual
awards of 500 stock options, pursuant to the 1994 Stock Compensation Plan for as
long as he remains a director.
BOARD ORGANIZATION AND MEETINGS
The Board of Directors of American has four standing committees: the
Executive Committee, the Audit Committee, the Compensation Committee and the
Nominating Committee. During 1995, the Executive Committee was composed of
Messrs. Andrews, Culpepper, Gerry, Moore and Nitze. The function of this
Committee is to exercise all the powers and authority of the Board of Directors
during the intervals between the meetings of the Board, except to the extent
that such authority is limited by law. In 1995, the Executive Committee held
four meetings.
During 1995, the Audit Committee was composed of Messrs. Nitze, Gerry and
Moore. The Committee's function is to recommend to the Board of Directors the
independent public accountants to be employed by American; to confer with the
independent public accountants concerning the scope of their audit and, on
completion of their audit, to review the accountants' findings and
recommendations; and to review the adequacy of American's system of internal
accounting controls. In 1995, the Audit Committee held three meetings.
During 1995, the Compensation Committee was composed of Messrs. Culpepper
and Hoffstot and Ambassador Curley. The Committee's duties are to approve the
compensation of the officers of the Company; review the Company's salary
administration policies; review the Company's Stock Compensation Plan (the "1983
Plan"), Employee Stock Ownership Plan ("ESOP"), 401(k) Plan, Phantom Stock Plan
("Phantom Plan"), 1994 Stock Compensation Plan (the "1994 Plan") and other
compensation plans; select trustees and administrators for such plans; and, to
the extent not otherwise delegated by the Board or Executive Committee, grant
bonuses, options and benefits under such plans and otherwise approve individual
transactions between the Company and officers or prospective officers that
significantly affect the officers' benefits or compensation. In 1995, the
Compensation Committee held three meetings.
During 1995, the Nominating Committee was composed of Messrs. Nitze,
Andrews and Moore and Ambassador Curley. This Committee is responsible for
recommending to the Board of Directors the nominees for election as directors at
the Annual Meeting. The Committee will accept recommendations of nominees for
election as directors
3
from stockholders if such recommendations are received by the Secretary in a
timely fashion. In 1995, the Nominating Committee acted once by unanimous
written consent.
During 1995, the Board of Directors held ten meetings. No director holding
office during 1995, except Messrs. Curley, Frost, Moore and Nitze, attended less
than seventy-five percent of the aggregate number of meetings of the Board of
Directors and of all Committees of which he was a member.
PRINCIPAL SECURITY HOLDERS
The following table sets forth certain information with respect to the only
persons known by American, based on statements filed by such persons pursuant to
Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended (the
"34 Act"), to own beneficially in excess of 5% of the Common Stock as of March
31, 1996.
Number Percent Of
Name And Address Of Beneficial Owner Of Shares Class (1)
- --------------------------------------- --------- ----------
General Electric Pension Trust 1,995,559 (2) 16.4
3003 Summer Street
Stamford, Connecticut 06904
New York Life Insurance Company 1,148,196 (3) 9.6
51 Madison Avenue
New York, New York 10010
Massachusetts Mutual Life Insurance Company 962,854 (4) 7.9
1295 State Street
Springfield, Massachusetts 01111
UNUM Corporation 799,438 (5) 6.8
2211 Congress Street
Portland, Maine 04122
- ------------
(1) Pursuant to Rule 13d-3(d)(1) under the 34 Act, the table includes shares of
Common Stock that can be acquired through the exercise of options, warrants
or convertible securities within 60 days. The percent of the class owned by
each such person has been computed assuming the exercise of all such
options, warrants and convertible securities deemed to be beneficially
owned by such person, and assuming that no options, warrants or convertible
securities held by any other person have been exercised.
(2) Includes 333,333 shares issuable upon conversion of Convertible Preferred
Stock represented by 200,000 Depositary Shares.
(3) Includes 166,667 shares issuable upon conversion of Convertible Preferred
Stock represented by 100,000 Depositary Shares.
(4) Includes 629,500 shares of Common Stock and 333,354 shares issuable upon
exercise of warrants to purchase Common Stock.
(5) Based upon a Schedule 13G, as amended, filed by UNUM Corporation with the
Securities and Exchange Commission (the "SEC").
SECURITY OWNERSHIP OF MANAGEMENT
The table below sets forth information concerning the shares of Common
Stock beneficially owned, as of March 31, 1996, by each director, the Chief
Executive Officer and the four other most highly compensated officers who were
serving at the end of American's last fiscal year. Pursuant to Rule 13d-3(d)(1)
under the 34 Act, the table includes shares of Common Stock that can be acquired
through the exercise of options, warrants or convertible securities within 60
days. The percent of the class owned by each such person has been computed
assuming
4
the exercise of all such options, warrants and convertible securities deemed to
be beneficially owned by such person, and assuming that no options, warrants or
convertible securities held by any other person have been exercised. Except as
indicated, each individual has sole voting power and sole investment power over
all shares listed opposite his name.
Number of Shares Percent
Of Common Stock Of Class
--------------- --------
Mark Andrews............................ 255,276 (1) 2.1
Harry W. Colmery, Jr. *................. 9,507 **
Irvin K. Culpepper, Jr. *............... 2,500 **
Walter J.P. Curley, Jr. *............... 13,500 **
Phillip Frost, M.D.*.................... 224,446 (2) 1.9
Peter G. Gerry *........................ 3,625 **
H. Phipps Hoffstot, III *............... 59,113 (3) **
John H. Moore *......................... 4,031 **
Peter P. Nitze *........................ 42,009 (4) **
John M. Hogan........................... 28,781 (5) **
Harold M. Korell........................ 45,662 (6) **
Robert R. McBride, Jr................... 9,553 (7) **
Steven L. Mueller....................... 11,837 (8) **
All directors and executive officers
as a group (17 persons)................ 745,924 (9) 6.2
* Amounts include 2,500 shares issuable upon exercise of stock options
** Less than one percent
(1) Includes 55,348 shares held directly or indirectly by Mr. Andrews'
children and a company of which Mr. Andrews' wife is a principal
shareholder and a director, and as to which shares he disclaims
beneficial ownership. Also includes 47,050 shares issuable upon exercise
of stock options and 1,420 shares allocated to Mr. Andrews under the
401(k) Plan.
(2) Includes 40,000 Depositary Shares.
(3) Includes 40,113 shares over which Mr. Hoffstot shares investment and
voting power and as to which shares he disclaims beneficial ownership.
(4) Includes 28,842 shares owned by general partnerships of which Mr. Nitze
is a general partner and over which he shares voting and investment power
and 4,000 Depositary Shares.
(5) Includes 10,812 shares issuable upon exercise of stock options, and 531
shares allocated to Mr. Hogan under the 401(k) Plan.
(6) Includes 1,000 Depositary Shares, 20,812 shares issuable upon exercise of
stock options, and 374 shares allocated to Mr. Korell under the 401(k)
Plan.
(7) Includes 4,437 shares issuable upon exercise of stock options, and 386
shares allocated to Mr. McBride under the 401(k) Plan.
(8) Includes 4,437 shares issuable upon exercise of stock options, and 1,587
shares allocated to Mr. Mueller under the 401(k) Plan.
(9) These shares include, for all executive officers other than the Chief
Executive Officer and the four other most highly compensated officers,
15,649 shares issuable upon exercise of stock options, and 5,839 shares
allocated to officers under the 401(k) Plan.
5
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS (PROPOSAL NO. 2)
The Board of Directors has appointed, and recommends the approval of the
appointment of, Arthur Andersen LLP as independent public accountants of
American for 1996. This firm has acted as independent public accountants for
American since its incorporation in 1980.
Representatives of Arthur Andersen LLP are expected to attend the Annual
Meeting and will have an opportunity to make a statement if they desire to do so
or to respond to appropriate questions raised by stockholders.
The affirmative vote of a majority of the votes cast by holders of the
outstanding shares of Common Stock and the outstanding shares of Convertible
Preferred Stock (represented by Depositary Shares) present in person or by proxy
and entitled to vote at the Annual Meeting, voting as a single class, is
required to approve the appointment of Arthur Andersen LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPOINTMENT OF
ARTHUR ANDERSEN LLP (PROPOSAL NO. 2).
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to the
compensation for the years 1995, 1994 and 1993 for American's Chief Executive
Officer and the four highest paid executive officers other than the Chief
Executive Officer who were serving at the end of American's last fiscal year.
All 1993 and 1994 share amounts and prices are adjusted for the 1995 one-for-ten
reverse stock split of the Common Stock.
<TABLE>
<CAPTION>
Long-Term Compensation Awards
-----------------------------
Securities
Annual Compensation Underlying
----------------------- Restricted Options/SAR'S
Stock (Option Units) All Other
Name And Principal Position Year Salary Bonus Awards (1) (Shares) Compensation (2)
- --------------------------- ---- -------- -------- ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Mark Andrews .............................. 1995 $286,662 $200,000 None 120,000(3) $ 6,900
Chairman and .............................. 1994 270,000 75,000 None None 210,316
Chief Executive Officer ................... 1993 270,000 60,000 $430,513 68,200(4) 147,919
John M. Hogan ............................. 1995 189,583 100,000 None 20,000(3) 1,050
Senior Vice President and ................. 1994 175,000 65,000 None None 5,437
Chief Financial Officer ................... 1993 150,000 50,000 146,766 23,250(4) 1,318
Harold M. Korell .......................... 1995 202,500 100,000 None 60,000(3) 1,050
Senior Vice President - ................... 1994 190,000 50,000 None None 5,437
Production ................................ 1993 183,413 57,000 146,766 23,250(4) 1,318
Robert R. McBride, Jr. .................... 1995 140,000 35,000 None 10,000(3) 1,050
Vice President - Production ............... 1994 140,000 30,000 None None 2,261
Operations ................................ 1993 137,804 28,000 48,922 7,750(4) 1,050
Steven L. Mueller ......................... 1995 140,000 35,000 None 10,000(3) 1,050
Vice President - Exploitation ............. 1994 140,000 30,000 None None 2,512
1993 137,804 28,000 48,922 7,750(4) 1,050
</TABLE>
- ------------
(1) Granted in October 1993 under American's 1983 Plan. One-third of the
shares vested on the second anniversary of the grant, one-third of the
shares will vest on the third anniversary of the grant and one-third of the
shares will vest on the fourth anniversary of the grant. The total number
of shares of Restricted Common Stock held by the named officers as of
December 31, 1995 and the total value thereof based on the $13.125 per
share closing price of the Common Stock on the American Stock Exchange at
the grant date were as follows: Mr. Andrews - 34,100 shares: $447,563; Mr.
Korell - 11,625 shares: $152,578; Mr. Hogan - 11,625 shares: $152,578; Mr.
McBride - 2,583 shares: $33,901 and Mr. Mueller - 3,870 shares: $50,859.
The
6
aggregate number and value of all Restricted Common Stock Awards
totaled 79,725 shares and $1,046,391. To the extent paid on shares of
Common Stock, dividends will also be paid on Restricted Common Stock.
(2) All other compensation for 1995 consisted of the following: (i) Company
contributions to the 401(k) Plan of $1,050 for each of the named officers;
and (ii) Company-paid life insurance premiums for Mr. Andrews of $5,850.
(3) Amounts represent options granted under the 1994 Plan which was approved by
stockholders at the 1995 Annual Meeting. The numbers of options granted
under the 1994 Plan were as follows: Mr. Andrews - 40,000 shares; Mr. Hogan
- 20,000 shares; Mr. Korell - 20,000 shares; Mr. McBride - 10,000 shares;
and Mr. Mueller - 10,000 shares. In addition, Mr. Andrews was permitted to
purchase up to 10,000 shares of Common Stock, the purchase of which would
provide options with a $12.50 exercise price at a rate of eight options for
each share of Common Stock purchased during a specified period. Mr. Andrews
has purchased the full 10,000 shares. In addition, Mr. Hogan and Mr. Korell
were each permitted to purchase up to 5,000 shares of Common Stock, the
purchase of which would provide options with a $12.50 exercise price at a
rate of eight options for each share of Common Stock purchased during a
specified period. Mr. Hogan elected not to purchase shares and Mr. Korell
has purchased the full 5,000 shares.
(4) Amounts represent option units granted in October 1993 under American's
Phantom Plan. One quarter of the option units vest on each anniversary of
the grant. In June 1995, the option units were converted to options with
the same option price and vesting period as the original option units.
OPTION/SAR GRANTS
The following table sets forth certain information with respect to options
granted under the 1994 Plan, which grants were approved by the stockholders at
the 1995 Annual Meeting.
<TABLE>
<CAPTION>
Potential
Realizable Value
% of Total at Assumed Annual
Options Rates of Stock Price
Number Granted to Exercise Appreciation for Term
of Options Participants Price Expiration ---------------------------
Name And Position Granted in 1995 ($/Unit) Date (1) 5% 10%
- ------------------------------- ----------- ---------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mark Andrews(2) ............................. 120,000 27.5% $ 12.50 10/31/2004 $2,443,342 $3,890,614
Chairman of the Board and
Chief Executive Officer
John M. Hogan(3) ............................ 20,000 4.6% 12.50 10/31/2004 407,224 648,436
Senior Vice President and
Chief Financial Officer
Harold M. Korell(4) ......................... 60,000 13.7% 12.50 10/31/2004 1,221,671 1,945,307
Senior Vice President -
Operations
Robert R. McBride, Jr ....................... 10,000 2.3% 12.50 10/31/2004 203,612 324,218
Vice President - Production
Operations
Steven L. Mueller ........................... 10,000 2.3% 12.50 10/31/2004 203,612 324,218
Vice President - Exploitation
</TABLE>
- ------------
(1) Granted on November 1, 1994 subject to stockholder approval which was
received on June 13, 1995. No more than one quarter of the options vest
on each anniversary date of the grant; the options remain outstanding for
a period of 10 years.
(2) Includes 80,000 options awarded to Mr. Andrews with a $12.50 exercise
price at a rate of eight options for each share of Common Stock purchased
during a specified period. Mr. Andrews has purchased the full 10,000
shares of Common Stock.
7
(3) In addition, Mr. Hogan was awarded up to 40,000 options with a $12.50
exercise price at a rate of eight options for each share of Common Stock
purchased during a specified period. Mr. Hogan elected not to exercise
his right to purchase shares of Common Stock.
(4) Includes 40,000 options awarded to Mr. Korell with a $12.50 exercise
price at a rate of eight options for each share of Common Stock purchased
during a specified period. Mr. Korell has purchased the full 5,000 shares
of Common Stock.
In addition to the options granted above, at the election of the employees,
the employees were permitted to convert their remaining option units granted
under the Phantom Plan in 1993 to Incentive Stock Options under the 1994 Plan to
the extent permitted and Nonqualified Stock Options at the original option unit
price. The options will vest at the same rate as the option units with a term of
ten years from the original option units award date. The 1994 Plan was approved
at the 1995 Annual Meeting and approximately 154,113 additional options were
issued under the 1994 Plan, including 113,775 options to the Executive Group and
40,338 to the Non-Executive Officer Employee Group. See Summary Compensation
Table for option units granted under the Phantom Plan.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides information with respect to the unexercised
options to purchase the Common Stock held by the executive officers named in the
Summary Compensation Table at December 31, 1995. None of these executive
officers exercised any stock options during 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-money Options/
Options/SAR'S Held at SAR'S at
December 31, 1995 December 31, 1995 (1)
------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Mark Andrews ............... 83,550 126,600 $ 0 $ 0
Harold M. Korell ........... 42,687 62,250 0 0
John M. Hogan .............. 28,687 31,250 0 0
Robert R. McBride, Jr ...... 10,312 13,000 0 0
Steven L. Mueller .......... 10,312 13,000 0 0
(1) Based on the closing price of the Common Stock on the American Stock
Exchange on December 31, 1995 of $11.375.
AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS AND KEY EMPLOYEES
After consultations by the Compensation Committee with its independent
compensation consultant regarding current practices by companies surveyed by
such consultant with respect to severance and employment agreements, upon the
Committee's recommendation, American has entered into new severance agreements
with eight of its executive officers and key employees and an employment
agreement with the Chief Executive Officer providing for certain payments and
other benefits upon the involuntary termination of the employment of such
persons, including their constructive termination following a Change in Control,
as defined in such agreements, of American. The severance and employment
agreements are intended to promote the retention of such persons in the service
of American by providing them with an extra measure of financial security. The
agreements provide that, upon involuntary termination, Mark Andrews, the Chief
Executive Officer, shall receive cash payments equal to three times an amount
equal to the sum of his base annual salary plus the average amount of the
bonuses paid to him in the last three fiscal years of the Company; each of John
Hogan and Harold Korell, Senior Vice Presidents, shall receive cash payments
equal to two times (three times in the event of a Change in Control) an amount
equal to the sum of their respective base annual salaries plus the average
amount of the bonuses paid to each individual in the last three fiscal years of
the Company; and each of Cindy Gerow, Harry Harper, Robert McBride, Steve
Mueller, Frank Murphy and Elliott Pew, Vice Presidents, shall receive cash
payments equal to one times (two times in the event of Change in Control) an
amount equal to the sum of their respective base annual salaries plus the
average of the bonuses paid to each individual in the last three fiscal years of
the Company. Such persons will also receive: (i) six months of medical and
dental insurance benefits (except the disability coverage) at the expense of
American followed by 18 months of reimbursement for payments made by such
persons for medical
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and dental insurance continuation coverage in connection with rights conferred
under the Consolidated Omnibus Budget Reconciliation Act of 1985, (ii) vesting
of awards under the Company's stock compensation plans and Phantom Plan and
(iii) extension by six months of the exercise period for options. In addition to
the termination benefits described above, the employment agreement with Mr.
Andrews: (i) provides for an initial term of three years which automatically
renews for one year periods unless the Board of Directors gives written notice
or the agreement is otherwise terminated in accordance with its provisions, (ii)
summarizes Mr. Andrews' duties, which may be changed with the mutual consent of
the Board of Directors and Mr. Andrews, (iii) sets his base salary at $310,000,
(iv) entitles him to participate in the bonus and other benefits plans available
to executives of the Company, (v) entitles him to $2,500,000 of life insurance
at the Company's expense and (vi) provides that Mr. Andrews may, under certain
circumstances, perform post-employment consulting services and receive a reduced
severance payment. The agreements do not provide for any benefits in the event
of a termination for cause. The severance agreements provide for reduction of
benefits under certain circumstances to avoid excise tax under Section 4999 of
the Internal Revenue Code of 1986, as amended.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
New York Life Insurance Company ("New York Life"), the beneficial owner of
9.6% of the outstanding Common Stock, as calculated pursuant to Rule 13d-3(d)(1)
under the 34 Act, and one of its wholly owned subsidiaries were investors in
certain of American's institutional property acquisition programs (the "APPL
Programs") which were dissolved in 1995. Further, in April 1994, New York Life
established a $40.0 million nonrecourse secured credit facility in favor of a
wholly owned subsidiary of American to be used to acquire interests in the APPL
Programs. Under the terms of the facility, American's subsidiary paid a
commitment fee of $200,000 and financing fees of 1.25% of funds advanced and
advances accrue interest at rates varying from 3% to 6% over the 30-day AI/PI
commercial paper rate over the one-year term of borrowings under the facility.
During 1994, the Company's subsidiary borrowed approximately $32.0 million under
this facility and made interest and financing fee payments aggregating $1.4
million. In early 1995, this facility was retired using existing capacity on the
Company's bank credit facility.
In mid-1990, American agreed to act as liquidator for New York Life in
connection with New York Life's investment in a partnership managed by another
oil company. In December 1993, American and New York Life's subsidiary, New York
Life Resources, Inc., formed Ancon Partnership Ltd., a Texas limited partnership
("Ancon"), into which New York Life Resources, Inc., as a limited partner,
contributed these properties and American, as general partner, purchased a 20%
interest for $1.5 million. In May 1995, New York Life and certain affiliates
transferred certain of its limited partner's interests in the APPL Programs to
Ancon. The Company acquired a 20% interest in these properties for approximately
$6.7 million in cash. American anticipates that New York Life and various
affiliates will contribute additional properties to Ancon. American is obligated
to purchase a 1% interest in such additional properties and will have the option
to purchase an additional 19% interest therein.
Wholly owned subsidiaries of New York Life and of American act as general
partners of the NYLOG Programs, a series of producing property acquisition
partnerships which were offered to the public through registered representatives
of New York Life and several other broker dealers. As previously reported by the
Company, American, American Exploration Production Company ("AEPCO"), a wholly
owned subsidiary of the Company, New York Life and several of its subsidiaries,
including NYLIFE Inc. ("NYLIFE"), are currently involved in litigation with
investors in the NYLOG Programs. In connection with this litigation, the
Company, AEPCO and NYLIFE have entered into an indemnity agreement (the
"Indemnity Agreement"), pursuant to which NYLIFE has agreed to indemnify the
Company and AEPCO from and against any and all judgments or settlements entered
or reached in such litigation or any subsequent lawsuits by investors in the
NYLOG Programs based on claims and factual allegations substantially similar to
those contained in the original complaints filed. Pursuant to the Indemnity
Agreement, NYLIFE has assumed control of the joint defense of these litigations
at NYLIFE's expense, including, but not limited to, any settlement discussions
or settlements. Additionally, pursuant to the Indemnity Agreement, the Company
and AEPCO have agreed that if a settlement of the litigation occurs and in
connection therewith the assets of the NYLOG Programs are sold in liquidation of
the NYLOG Programs, the Company and AEPCO will be allocated only 5% (which
represents AEPCO's initial capital contribution percentage) of revenues and net
proceeds from the sale of properties effective from and after February 1, 1996.
In connection with the stock purchase program adopted by the Compensation
Committee pursuant to which members of management were granted Restricted Common
Stock and option units based, in the case of senior management, upon the number
of shares of Common Stock acquired, the Company permitted senior officers the
right to finance with the Company a portion of the shares acquired. In this
connection, Mr. Andrews, along with four other members of senior management,
financed a portion of the shares acquired. The total amount outstanding of all
such loans as of December 31, 1995 was $66,171, with Mr. Andrews' borrowings
totaling
9
$32,502. These loans bear interest at the applicable federal rate of 3.91%
provided by Section 1274(d) of the Internal Revenue Code of 1986, as amended,
and are payable semi-monthly over three years with final payment due in October
1996. Mr. Andrews subsequently repaid his loan in early 1996.
During 1995, Nitze-Stagen & Company, Inc., of which Peter P. Nitze, a
director of American, is Chairman, performed financial consulting services for
American. American paid this company $20,000 for such services rendered during
1995. During 1995, American paid John H. Moore, a director of American, $11,250
for petroleum consulting services. O. Donaldson Chapoton, a director of American
through June 1995, is a partner in the law firm at Baker and Botts, L.L.P.
During 1995, Baker and Botts, L.L.P. received $285,000 from the Company for
legal services which it provided to American, although Mr. Chapoton has no
direct or indirect material interest in such amount.
COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION
GENERAL. The Compensation Committee of the Board of Directors establishes
corporate policy on the compensation of the Company's employees, including its
executive officers. The Committee's recommendations relating to the compensation
of executive officers are subject to the approval of the full Board of
Directors. The primary components of the Company's executive compensation
program are base salary, cash bonus and long-term equity-related incentives.
During 1995, the Compensation Committee held four meetings and consulted
extensively with the Committee's independent compensation consultant. The
Committee's independent compensation consultant provided the Committee with
compensation data developed from published and private survey sources for both
publicly traded and privately held companies and an analysis of 14 independent
oil and gas companies which were deemed comparable to the Company by the
consultant. In early 1996, Ambassador Curley, Chairman of the Committee, and Mr.
Hoffstot rotated off the Committee, and Mr. Culpepper became the Chairman with
Messrs. Colmery and Moore joining the Committee.
BASE SALARIES. In August 1995, the Committee reviewed the base salaries of
the executive officers. At that time, based on market data compiled by the
Committee's compensation consultant, base salaries being paid to the Chief
Executive Officer and the two Senior Vice Presidents were found to be below the
peer group median base salary levels. Base salaries being paid to the other
executive officers of the Company were between the median and 75th percentile
base salary levels based on the Committee's compensation consultant's data.
Based on individual performance and the desire to pay competitive base
salaries, the Committee adjusted the base salaries of the Chief Executive
Officer, the Senior Vice President/Operations and the Senior Vice President and
Chief Financial Officer effective July 1, 1995 from $270,000, $190,000 and
$175,000 to $310,000, $220,000 and $210,000, respectively. After the
adjustments, the base salary paid to each of the three senior executive officers
fell between the median and 75th percentile base salary levels based on the
Committee's compensation consultant's data.
CASH BONUSES. Cash bonuses are paid to reward executives for achieving
specific corporate financial performance objectives and for favorable
performance of the price of the Company's Common Stock relative to that of a
peer group comprised of specified publicly traded independent oil and gas
companies.
Corporate financial performance with respect to specific objectives ("CFP")
is determined based upon actual results compared to threshold, target and
maximum performance levels established by the Committee at the beginning of each
year. For 1995, the objectives related to: (i) cash flow per share; (ii) proved
reserve value added per dollar of cost incurred; (iii) income before taxes; and
(iv) lease operating and general and administrative expenses as a percent of oil
and gas revenues. Each of the CFP objectives was equally weighted. If maximum
performance levels were achieved, the Chief Executive Officer, Senior Vice
Presidents and other executive officers would earn CFP cash bonuses equal to
60%, 40% and 20%, respectively, of their respective base salaries. If, however,
an aggregate threshold performance level was not achieved, no CFP bonus would be
paid to any executive officer.
For 1995, based on actual Company results compared to CFP objectives, CFP
cash bonuses were paid to the Chief Executive Officer, Senior Vice Presidents
and other executive officers equal to 24%, 16% and 8%, respectively, of their
respective base salaries.
Executive officers also had the opportunity to earn a cash bonus based upon
the performance of the Company's Common Stock price relative to that of its peer
group determined by the Committee. If the increase in the market price of the
Common Stock during 1995 ranks in the 75th percentile or greater relative to the
increase in the market price of the stock of the peer group, a maximum pool
equal to $518,000 would be available for bonus awards by the Committee. No pool
for cash bonuses would be available for a percentile ranking of less than 12.5%.
During
10
1995, the price of the Common Stock as quoted on the American Stock Exchange,
increased from $9.375 at December 31, 1994 to $11.375 at December 31, 1995, an
increase of 23.5%, and placed the Company in the 61st percentile of common stock
price performance experienced by the peer group. Based upon these results, a
pool of $398,000 was established for bonuses. Actual bonus awards totaled
$382,598 of which $125,527 was awarded to the Chief Executive Officer, $64,766
to the Senior Vice President-Operations, $66,367 to the Senior Vice President
and Chief Financial Officer and an aggregate of $125,938 to the other executive
officers.
LONG-TERM EQUITY-RELATED INCENTIVES. The long-term equity-related component
of compensation historically has consisted of both stock option grants and
participation in the Company's ESOP and 401(k) Plan. Newly-hired executive
officers are generally granted a base level of stock options. While not
committed to any particular pattern or timing, the Committee generally follows a
practice of making periodic grants of additional stock options. All employees of
the Company had participated in the ESOP, generally receiving an allocation
based upon a percentage of their cash compensation, but in view of the absence
of recent contributions, the ESOP was terminated in late 1994. Participation in
the 401(k) Plan is also available to all regular, salaried employees, with the
Company matching a portion of the employee's contribution through contributions
of Common Stock.
As reported by the Committee last year, based on the independent
compensation consultant's survey in 1994 indicating that long-term incentives
provided by the Company were below those provided by the market median of
companies in the survey, the Committee recommended the adoption of the 1994 Plan
and the grant of options to senior management thereunder. The grants made to the
top three members of Senior Management provided them with market median levels
of stock options, with the right to receive additional options based upon shares
of Common Stock purchased. For the remaining individuals listed in the
Compensation Table, options granted were at approximately the 75th percentile of
the market. In adopting the 1994 Plan, the Committee determined that long-term
stability of the Company will be served more effectively by a closer
identification of management's interests with those of the stockholders by
providing equity based compensation.
In connection with adoption of the Company's Phantom Stock Plan during 1993,
members of senior management were provided the right to purchase designated
numbers of shares of Common Stock at the market price and upon such purchase,
for each share so purchased, two shares of Restricted Common Stock under the
1983 Plan and four option units under the Phantom Stock Plan were granted. With
the approval of the 1994 Plan by the stockholders, holders of option units were
allowed to exchange their then outstanding option units for options under the
1994 Plan on comparable terms.
EMPLOYMENT AND SEVERANCE AGREEMENT. During 1995 the Committee, assisted by
its independent compensation consultant, reviewed the severance agreements then
in place with management and determined that such agreements did not provide
market level benefits. Based upon a survey conducted by the Committee's
independent compensation consultant and developed from published and private
sources for both publicly traded and privately held companies, the two Senior
Vice Presidents' severance payments in the event of a Change in Control were
adjusted upward, the prior arrangements with the top eight members of management
were reduced to severance agreements, and the Chief Executive Officer was
provided with an employment agreement, all of which the Committee found was
consistent with market practice. The Board of Directors approved these new
agreements at its November 30, 1995 meeting. The Committee believes that the
implementation of these agreements will benefit the Company by more closely
aligning the interest of management with the interest of the Company's
stockholders. For a more detailed description of these agreements, see
"Agreements with Certain Executive Officers and Key Employees," above.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. With respect to 1995, the
Compensation Committee awarded Mr. Andrews, the Chairman and Chief Executive
Officer, a bonus of $200,000. This award was ratified by the full Board of
Directors. The bonus reflected the Committee's consideration of the Company's
progress based on specific factors such as increased cash flow per share, income
before taxes and reductions in lease operating and general and administrative
expenses as a percent of revenues and the leadership Mr. Andrews has shown over
the past year. For a more detailed description of specific factors considered,
see "Cash Bonuses" above.
SECTION 162(M). The Compensation Committee has not yet adopted a policy with
respect to qualification of executive compensation in excess of $1 million per
individual for deduction under Section 162(m) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder. The Committee currently does
not anticipate that the compensation of any executive officer during 1996 will
exceed the limits on deductibility for 1996. In determining a policy for future
periods, the Committee would expect to consider a number of factors, including
the tax position of the Company, the materiality of amounts likely to be
involved and any potential ramifications of the loss of flexibility to respond
to unforeseeable changes in circumstances.
11
Executive compensation is an evolving field. The Compensation Committee
monitors trends in this area, as well as changes in law, regulation and
accounting practices, that may affect either its compensation philosophy or its
practices. Accordingly, the Committee reserves the right to alter its approach
in response to changing conditions.
The foregoing report has been furnished by Messrs. Culpepper, Colmery
and Moore.
PERFORMANCE GRAPH
The following graph presents a five-year comparison of the yearly change in
the cumulative total return of the Common Stock with the cumulative total return
of the American Stock Exchange ("AMEX") Market Value Index and the Dow Jones
Oil-Secondary Index. The graph assumes $100 was invested on December 31, 1990,
in the Common Stock and in each of the two other indices. The graph also assumes
the reinvestment of all dividends. Stock price performance shown on the graph is
not necessarily indicative of future price performance.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
12/90 12/91 12/92 12/93 12/94 12/95
----- ----- ----- ----- ----- -----
American Exploration ................. 100 71 46 38 27 33
AMEX Market Value .................... 100 128 130 155 141 178
Dow Jones Oil - Secondary ............ 100 98 99 110 106 123
12
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the 34 Act requires American's directors and executive
officers, and persons who own more than ten percent of a registered class of the
Company's equity securities ("Ten Percent Owners"), to file with the SEC and the
American Stock Exchange initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of American. Such
officers, directors and Ten Percent Owners are required by SEC regulations to
furnish American with copies of all Section 16(a) forms they file.
To American's knowledge, based solely on review of the copies of such
reports furnished to American and written representations that no other reports
were required, during the fiscal year ended December 31, 1995, the executive
officers, directors and Ten Percent Owners complied with all applicable Section
16(a) filing requirements.
OTHER BUSINESS
Management does not intend to bring any business before the Annual Meeting
other than the matters referred to in the accompanying notice and at this date
has not been informed of any matters that may be presented at the Annual Meeting
by others. If, however, any other matters properly come before the Annual
Meeting, it is intended that the persons named in the accompanying proxy will
vote pursuant to the proxy in accordance with their best judgment on such
matters.
ANNUAL REPORT
American's 1995 Annual Report to Stockholders, including consolidated
financial statements for the year ended December 31, 1995, accompanies these
proxy solicitation materials. The 1995 Annual Report to Stockholders is not part
of these proxy solicitation materials.
STOCKHOLDER PROPOSALS
Proposals intended to be presented by stockholders at American's 1997 Annual
Meeting must be received by American, at the address set forth on the first page
of this proxy statement, no later than December 18, 1996 in order to be included
in American's proxy materials and form of proxy relating to that meeting.
Stockholder proposals must also be otherwise eligible for inclusion.
13
P AMERICAN EXPLORATION COMPANY
R PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
X May 21, 1996
Y
The undersigned hereby appoints John M. Hogan and T. Frank Murphy, jointly
and severally, proxies, with full power of substitution and with discretionary
authority, to vote all shares of Common Stock and Depositary Shares which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of
American Exploration Company ("American") to be held on Tuesday, May 21, 1996,
at The Four Seasons Hotel, 1300 Lamar, Houston, Texas, at 10:00 a.m., or at any
adjournment thereof, hereby revoking any proxy heretofore given.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IN THE ABSENCE OF SPECIFIC DIRECTIONS TO THE CONTRARY, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF EACH OF THE DIRECTORS NAMED BELOW AND FOR THE APPROVAL OF
ARTHUR ANDERSEN LLP AS AMERICAN'S ACCOUNTANTS FOR 1996.
The undersigned hereby acknowledges receipt of the Notice of, and Proxy
Statement for, the aforesaid Annual Meeting.
1. ELECTION OF DIRECTORS, NOMINEES: Mark Andrews, Harry W. Colmery, Jr., Irvin
K. Culpepper, Jr., Walter J.P. Curley, Phillip Frost, M.D., Peter G. Gerry,
H. Phipps Hoffstot, III, John H. Moore and Peter P. Nitze as directors,
except as indicated below; or
[ ] FOR [ ] WITHHELD
For, except vote withheld from the following nominee(s):
- -------------------------------------------------------------------------------
2. APPROVAL OF THE APPOINTMENT OF Arthur Andersen LLP AS AMERICAN'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR 1996
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. With discretionary authority as to such other matters as may properly come
before the meeting
Signature(s) Date
Signature(s) Date
Note: Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title
as such.
