<PAGE> 1
As filed with the Securities and Exchange Commission on June 13, 1996.
Registration No. 333-398
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
AMENDMENT NO. 5 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-------------------------
ABRAXAS PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Nevada 1311 74-2584033
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) Number)
</TABLE>
Robert L. G. Watson
Chairman of the Board,
President and Chief Executive Officer
500 North Loop 1604 East, Suite 100
San Antonio, Texas 78232
(210) 490-4788
(Name, address, including zip code, and telephone number,
including area code, of registrant's principal executive offices and of agent
for service)
Copy to:
Steven R. Jacobs
Cox & Smith Incorporated
112 East Pecan Street, Suite 1800
San Antonio, Texas 78205
(210) 554-5255
Approximate Date of Commencement of Proposed Sale to the Public: As
soon as practicable after the effective date of this registration statement.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or investment reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
<PAGE> 2
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
-------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section
8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
ii
<PAGE> 3
CROSS REFERENCE SHEET
<TABLE>
<S> <C> <C>
1. Forepart of the Registration Statement Facing Page of Registration Statement; Cross
and Outside Front Cover Page of Reference Sheet; Outside Front Cover Page of Page of
Prospectus Prospectus
2. Inside Front And Outside Back Cover Inside Front Cover and Outside Back Cover Pages of
Pages Of Prospectus Prospectus
3. Summary Information, Risk Factors Risk Factors
and Ratio of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page of Prospectus
6. Selling Security Holders Selling Stockholders
7. Plan of Distribution Plan of Distribution
8. Description of Securities to be Description of Capital Stock
Registered
9. Interests of Named Experts and Counsel Not Applicable
10. Material Changes Recent Developments
11. Incorporation of Certain Information Documents Incorporated By Reference
by Reference
12. Disclosure of Commission Position Not Applicable
on Indemnification for Securities
Act Liabilities
</TABLE>
iii
<PAGE> 4
PROSPECTUS
3,325,000 Shares of Common Stock
ABRAXAS PETROLEUM CORPORATION
-------------------------
This Prospectus relates to an aggregate of 3,325,000 shares
(the "Shares") of common stock, par value $.01 per share ("Common
Stock"), of Abraxas Petroleum Corporation, a Nevada corporation (the
"Company"), that may be offered from time to time by certain
stockholders of the Company (the "Selling Stockholders"). See
"Selling Stockholders." The Company will receive no part of the
proceeds of such sales. See "Use of Proceeds." Expenses (other
than commissions and discounts of underwriters, dealers or agents and
attorneys fees incurred by the Selling Stockholders) incurred in
connection with this offering are expected to be approximately
$36,170. All of such expenses will be paid by the Company.
This Prospectus contains forward-looking information that
involves risks and uncertainties and such information is subject to
the assumptions set forth in connection therewith and the
information contained herein.
The Company has been advised by the Selling Stockholders that
they may sell all or a portion of the Shares offered by this
Prospectus from time to time (i) on the NASDAQ Stock Market at prices
prevailing at the time of such sales, (ii) otherwise than on the
NASDAQ Stock Market at market prices prevailing at the time of sale
or at negotiated prices, or (iii) by a combination of the
foregoing methods of sale. The Selling Stockholders and any broker,
dealer or other agent executing sell orders on behalf of the
Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Act"), in which
event commissions received by any such broker, dealer or agent may
be deemed to be underwriting commissions under the Act. See "Plan of
Distribution."
The Company's Common Stock is traded on the NASDAQ Stock
Market under the symbol AXAS. On June 11, 1996, the closing price for
the Common Stock as reported on the NASDAQ Stock Market was $6.625 per
share.
-------------------------
For a discussion of certain risk factors that should be
considered by prospective investors, see "Risk Factors" on pages 3 to
9.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
The date of this Prospectus is June 13, 1996.
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: The Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and the New York Regional Office, 7 World Trade Center,
12th Floor, New York, New York 10007, at prescribed rates. Such reports,
proxy statements and other information concerning the Company can also be
inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form S-3 under the
Act with respect to the Shares offered hereby (together with all
amendments, the "Registration Statement") with the Commission. This
Prospectus, filed as part of the Registration Statement, constitutes a
part of the Registration Statement and does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. In addition, certain documents filed by the Company
with the Commission have been incorporated by reference. See "Documents
Incorporated by Reference." Such additional information can be obtained
from the Commission's principal office in Washington, D.C.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents or portions thereof filed by the Company
are hereby incorporated by reference in this Prospectus:
(i) the Company's Annual Report on Form 10-K for the year
ended December 31, 1995;
(ii) the Company's Current Report on Form 8-K dated January 17, 1996;
(iii) the Company's Current Report on Form 8-K dated April 4, 1996,
as amended;
(iv) the Company's Quarterly Report on Form 10-Q dated May 14, 1996,
as amended;
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(v) the description of the Company's Common Stock contained in
the Company's Registration Statement Number 0-19118 filed on March 26,
1991 on Form 8-A relating thereto; and
(vi) the description of the Company's Common Stock Purchase
Rights contained in the Company's Registration Statement Number 0-19118
filed on December 7, 1994 on Form 8-A relating thereto.
In addition, all documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of the offering of the
Shares made hereby shall be deemed to be incorporated by reference into
this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained herein or in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for the purposes of this Prospectus to the extent
that a statement contained herein or in any subsequently filed document
which is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
The Company undertakes to provide without charge to each person to
whom a copy of this Prospectus is delivered, upon oral or written request
of such person, a copy of any and all of the documents incorporated by
reference herein (other than exhibits and schedules to such documents,
unless such exhibits or schedules are specifically incorporated by
reference into such documents). Such requests should be directed to Chris
E. Williford, Executive Vice President, Treasurer and Chief Financial
Officer, Abraxas Petroleum Corporation, 500 North Loop 1604 East, Suite
100, San Antonio, Texas 78232 or by telephone at (210) 490-4788.
RISK FACTORS
Prospective purchasers of the Shares offered hereby should
carefully consider, together with other information in this Prospectus,
the following risk factors that affect the Company.
Industry Conditions; Impact on Company's Profitability
The Company's revenues, profitability and future rate of growth
are substantially dependent upon prevailing prices for crude oil and natural
gas. Crude oil and natural gas prices can be extremely volatile and in
recent years have been depressed by excess total domestic and imported
supplies. Prices are also affected by actions of state and local
agencies, the United States and foreign governments and international
cartels. While prices for crude oil and natural gas increased during the
fourth quarter of 1995 and remained at these levels during the first quarter
of 1996, there can be no assurance that these levels for crude oil and
natural gas prices can be sustained.
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These external factors and the volatile nature of the energy markets make
it difficult to estimate future prices of crude oil and natural gas.
Any substantial or extended decline in the prices of crude oil and
natural gas would have a material adverse effect on the Company's financial
condition and results of operations, including reduced cash flow and
borrowing capacity. All of these factors are beyond the control of the
Company. Sales of crude oil and natural gas are seasonal in nature, leading
to substantial differences in cash flow at various times throughout the
year. Federal and state regulation of crude oil and natural gas
production and transportation, general economic conditions, changes in
supply and changes in demand all could adversely affect the Company's
ability to produce and market its crude oil and natural gas. If market
factors were to change dramatically, the financial impact on the Company
could be substantial. The availability of markets and the volatility of
product prices are beyond the control of the Company and thus represent a
significant risk.
In addition, declines in crude oil and natural gas prices might,
under certain circumstances, require a write-down of the book value of the
Company's crude oil and natural gas properties. If such declines were
severe enough, they could result in the occurrence of an event of default
under the Company's credit agreement with First Union National Bank of
North Carolina ("FUNB") that could require the sale of some of the
Company's producing properties under unfavorable market conditions or
require the Company to seek additional equity capital.
Losses From Operations
The Company has experienced recurring losses. For the years
ended December 31, 1992, 1993, 1994 and 1995, and the Company recorded net
losses of $4.0 million, $2.4 million, $2.4 million and $1.2 million,
respectively. The loss in 1992 included interest and other costs
incurred by the Company of $258,000 in connection with its indirect
ownership of 87.4% of the outstanding capital stock of a company which
owned a bituminous coal mine located in western Colorado (the "Eastside
Mine") and a writedown in the Company's carrying value of the Eastside
Mine of $2.63 million and the loss in 1994 included a further writedown
relating to the Company's decision to cease operations at the Eastside
Mine of $1.0 million representing the remaining carrying value of the
Eastside Mine. No assurance can be given that the Company will not
experience operating losses in the future.
Leverage and Debt Service
As of December 31, 1995, total debt and stockholders' equity
were approximately $41.6 million and $37.1 million, respectively. Based
upon the current level of operations, the Company believes that its cash
flow from operations as well as borrowing capabilities will be adequate
to meet its anticipated requirements for working capital, capital
expenditures, interest payments and scheduled principal payments through
December 31, 1996. There can be no assurance, however, that the
Company's business will continue to generate cash flow from operations at or
above
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<PAGE> 8
current levels. If the Company is unable to generate cash flow
from operations in the future to service its debt, it may be required to
refinance all or a portion of its existing debt or to obtain additional
financing. There can be no assurance that such refinancing would be
possible or that any additional financing could be obtained. If the
Company were unable to refinance its existing debt or obtain
additional financing and could not service its debt, FUNB could foreclose
on substantially all of the Company's producing properties because these
properties are pledged to secure the Company's indebtedness to FUNB.
The Company's ability to meet its debt service obligations and to reduce
its total debt will be dependent upon its future performance, which, in
turn, will be subject to general economic conditions and to financial,
business and other factors, including the prices received by the Company for
crude oil, natural gas and natural gas liquids, affecting the operations of
the Company, many of which are beyond its control.
The Company's credit agreement with FUNB contains a number of
covenants, including the following: (1) the ratio of current assets
to current liabilities (exclusive of any part of the loan which is current)
shall not be less than 1:1; and (2) as of the last day of each fiscal
quarter, the ratio of the Company's indebtedness, compared to annualized
net income plus non cash charges shall not be greater than 7.5 to 1.0.
The credit agreement also contains covenants relating to maintaining
corporate existence, maintaining title to all of the collateral free and
clear of all liens except for FUNB's liens and those permitted by FUNB,
maintaining all mineral interests in good repair and in compliance with
all laws, maintaining insurance, paying all taxes, not paying dividends
except as required on the Company's Series 1995-B Preferred Stock and not
selling any of the collateral securing the loans. The Company is currently
in compliance with these covenants.
Operating Hazards; Uninsured Risks
The nature of the crude oil and natural gas business involves
certain operating hazards such as crude oil and natural gas blowouts,
explosions, encountering formations with abnormal pressures, cratering
and crude oil spills and fires, any of which could result in damage to or
destruction of crude oil and natural gas wells, destruction of producing
facilities, damage to life or property, suspension of operations,
environmental damage and possible liability to the Company. In
accordance with customary industry practices, the Company maintains
insurance against some, but not all, of such risks and some, but not all, of
such losses. The occurrence of such an event not fully covered by
insurance could have a material adverse effect on the financial condition
and results of operations of the Company.
Shares Eligible for Future Sale
At June 11, 1996, the Company had 5,804,812 shares of Common
Stock outstanding of which 427,335 shares were held by affiliates. Of the
shares held by non-affiliates, 1,330,000 shares were sold in November
1995 in a private placement
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(the "Private Placement") of 1,330,000 units ("Units") each consisting of
one share of Common Stock and one Contingent Value Right ("CVR") at a
price of $8.00 per Unit. In addition, at June 11, 1996, the Company had
409,810 shares of Common Stock subject to outstanding options granted
under certain stock option plans (of which 68,600 shares were vested at
June 11, 1996), 437,500 shares issuable upon exercise of warrants and up to
1,330,000 shares of Common Stock issuable upon maturity of the CVRs in
November 1996 or, if the Company elects to extend the maturity date of the
CVRs, up to 1,995,000 shares of Common Stock in November 1997. The
actual number of shares issuable upon maturity of the CVRs is dependent
upon the difference between the target price (which is $10.00 in 1996 and
$12.50 in 1997) and the median of the averages of the closing bid prices of
the Common Stock on the Nasdaq Stock Market during the three consecutive
20-trading day periods immediately preceding the maturity date. All
of the shares of Common Stock held by affiliates are restricted or
control securities under Rule 144 promulgated under the Securities
Act of 1933, as amended (the "Securities Act"). The shares of Common
Stock issuable upon exercise of the stock options have been registered under
the Securities Act. In addition, the shares of Common Stock issuable upon
maturity of the CVRs have been registered under the Securities Act and the
shares of the Common Stock issuable upon exercise of the warrants are
subject to certain registration rights and, therefore, will be eligible
for resale in the public market after a registration statement covering
such shares has been declared effective. Sales of shares of Common Stock
under Rule 144 or pursuant to a registration statement could have a material
adverse effect on the price of the Common Stock and could impair the
Company's ability to raise additional capital through the sale of its equity
securities.
Competition
The Company encounters strong competition from major oil companies
and independent operators in acquiring properties and leases for the
exploration for, and production of, crude oil and natural gas.
Competition is particularly intense with respect to the acquisition of
desirable undeveloped crude oil and natural gas leases. The principal
competitive factors in the acquisition of such undeveloped crude oil and
natural gas leases include the staff and data necessary to identify,
investigate and purchase such leases, and the financial resources
necessary to acquire and develop such leases. Many of the Company's
competitors have financial resources, staff and facilities substantially
greater than those of the Company. In addition, the producing, processing
and marketing of crude oil and natural gas is affected by a number of
factors which are beyond the control of the Company, the effect of which
cannot be accurately predicted.
The principal raw materials and resources necessary for the
exploration and production of crude oil and natural gas are leasehold
prospects under which crude oil and natural gas reserves may be discovered,
drilling rigs and related equipment to explore for such reserves and
knowledgeable personnel to conduct all phases of crude oil and natural gas
operations. The Company must compete for such raw materials and
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resources with both major crude oil and natural gas companies and
independent operators. Although the Company believes its current operating
and financial resources are adequate to preclude any significant
disruption of its operations in the immediate future, the continued
availability of such materials and resources to the Company cannot be
assured.
Reliance on Estimates of Proved Reserves and Future Net Revenues; Depletion
of Reserves
There are numerous uncertainties inherent in estimating quantities
of proved reserves and in projecting future rates of production and the
timing of development expenditures, including many factors beyond the
control of the Company. The reserve data incorporated by reference in
this Prospectus represent only estimates. In addition, the estimates of
future net revenues from proved reserves of the Company and the present
value thereof are based upon certain assumptions about future production
levels, prices, and costs that may not prove to be correct over time. The
rate of production from crude oil and natural gas properties declines as
reserves are depleted. Except to the extent the Company acquires
additional properties containing proved reserves, conducts successful
exploration and development activities or, through engineering studies,
identifies additional behind-pipe zones or secondary recovery reserves,
the proved reserves of the Company will decline as reserves are produced.
Future crude oil and natural gas production is therefore highly dependent
upon the Company's level of success in acquiring or finding additional
reserves.
Acquisition Risks
The Company intends to continue acquiring producing crude oil
and natural gas properties or companies that own such properties.
Although the Company performs a review of the acquired properties that
it believes is consistent with industry practices, such reviews are
inherently incomplete. It generally is not feasible to review in depth
every individual property involved in each acquisition. Ordinarily, the
Company will focus its review efforts on the higher-valued properties
and will sample the remainder. However, even an in-depth review of
all properties and records may not necessarily reveal existing or
potential problems nor will it permit a buyer to become sufficiently
familiar with the properties to assess fully their deficiencies and
capabilities. Inspections may not always be performed on every well, and
environmental problems, such as ground water contamination, are not
necessarily observable even when an inspection is undertaken. In
addition, there can be no assurance that the Company will be able to
identify attractive acquisition opportunities or consummate acquisitions in
the future.
Title to Properties
As is customary in the crude oil and natural gas industry, the
Company performs a minimal title investigation before acquiring
undeveloped properties, which generally
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consists of obtaining a title report from legal counsel covering title to
the major properties and due diligence reviews by independent landmen
of the remaining properties. The Company believes that it has satisfactory
title to such properties in accordance with standards generally accepted in
the crude oil and natural gas industry. A title opinion is obtained
prior to the commencement of any drilling operations on such properties.
The Company's properties are subject to customary royalty interests,
liens incident to operating agreements, liens for current taxes and other
burdens, none of which the Company believes materially interferes with the
use of, or affect the value of, such properties. All of the Company's
properties are also subject to the liens of FUNB.
Government Regulation
The Company's business is subject to certain federal, state and
local laws and regulations relating to the exploration for and
development, production and marketing of crude oil and natural gas,
as well as environmental and safety matters. Such laws and regulations
have generally become more stringent in recent years, often imposing greater
liability on a larger number of potentially responsible parties. Because
the requirements imposed by such laws and regulations are frequently
changed, the Company is unable to predict the ultimate cost of
compliance with such requirements. There is no assurance that laws and
regulations enacted in the future will not adversely affect the Company's
financial condition and results of operations.
Dependence on Key Personnel
The Company depends to a large extent on Robert L. G. Watson,
its Chairman of the Board, President and Chief Executive Officer, for
its management and business and financial contacts. The unavailability of
Mr. Watson would have a materially adverse effect on the Company's
business. The Company's success is also dependent upon its ability to
employ and retain skilled technical personnel. While the Company has not
to date experienced difficulties in employing or retaining such personnel,
its failure to do so in the future could adversely affect its business. The
Company has entered into employment agreements with Mr. Watson and each
of the Company's vice presidents. The employment agreements terminate on
December 31, 1996 except that the term may be extended for an additional
year if by December 1 of the prior year neither the Company nor the
officer has given notice that it does not wish to extend the term. Except in
the event of a change in control, Mr. Watson's and each of the vice
president's employment is terminable at will by the Company for any reason,
without notice or cause.
Dividend Policy
The Company has never declared or paid any cash dividends to holders
of Common Stock and has no present intention to pay cash dividends to
holders of Common Stock in the future. Under its credit agreement with FUNB,
the Company is prohibited from paying cash dividends on the Common Stock.
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Limitations on the Availability of the Company's Net Operating
Loss Carryforwards
As a result of the acquisition of certain partnership interests
and crude oil and natural gas properties in 1990 and 1991, an ownership
change under section 382 of the Internal Revenue Code of 1986, as amended
("Section 382"), occurred in December 1991. Accordingly, it is expected that
the use of net operating loss carryforwards generated prior to December 31,
1991 of $6.9 million will be limited to approximately $235,000 per year.
As a result of the issuance of additional shares of Common Stock for
acquisitions and sales of stock, an additional ownership change under Section
382 occurred in October 1993. Accordingly, it is expected that the use
of all net operating loss carryforwards generated through October 1993,
or $13.4 million, will be limited to approximately $1.0 million per
year subject to the lower limitations described above. Of the $13.4
million net operating loss carryforwards, it is anticipated that the
maximum net operating loss that may be utilized before it expires is $7.2
million. Future changes in ownership may further limit the use of the
Company's carryforwards. In addition to the Section 382 limitations,
uncertainties exist as to the future utilization of the carryforwards
under the criteria set forth in FASB Statement No. 109, "Accounting for
Income Taxes". The Company established a valuation allowance of $5.7
million and $5.5 million for deferred tax assets at December 31, 1995 and
1994, respectively.
Anti-Takeover Provisions
The Company's Stockholder Rights Plan and certain provisions of
the Company's Articles of Incorporation and Bylaws and the Nevada
General Corporation Law may make it difficult to change control of the
Company and replace incumbent management. See "Description of Capital
Stock".
THE COMPANY
The Company is an independent energy company engaged in the
exploration for and acquisition, development and production of crude oil and
natural gas primarily along the Texas Gulf Coast and in the Permian
Basin of western Texas. The Company's business strategy is to acquire
and develop producing crude oil and natural gas properties that contain the
potential for increased value through exploitation and development. The
Company seeks to realize the potential in such acquisitions through
workovers, recompletions, secondary recovery operations and the drilling of
development wells.
The Company's principal offices are located at 500 North Loop 1604
East, Suite 100, San Antonio, Texas 78232 and its telephone number is
(210) 490- 4788.
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USE OF PROCEEDS
The Company will not receive any part of the proceeds from the sale
of the shares by the Selling Stockholders. The Company, however, received
net proceeds of $10.1 million from the Private Placement on November 17,
1995. Such proceeds were used to repay certain indebtedness to FUNB and for
general corporate purposes, including future acquisitions and the
development of existing properties.
RECENT DEVELOPMENTS
On November 17, 1995, the Company completed the Private Placement
and received net proceeds of $10.1 million. The Company issued 1,330,000
Units each consisting of one share of Common Stock and one CVR. The
CVRs are exchangeable for up to an aggregate of 1,995,000 shares of Common
Stock. See "Description of Capital Stock."
On March 21, 1996, the Company sold its 50% working interest in
the Portilla Field, San Patricio County, Texas, and 12% working interest in
the Happy Field, Garza County, Texas (together, the "Properties"), to
Acco, LLC ("Acco"). A report prepared by independent petroleum
engineers showed estimated net proved reserves of 2.1 million barrels of
crude oil and natural gas liquids and 3.5 billion cubic feet of natural gas
from these fields with a present value (discounted 10%) of estimated
future net cash flows (before income taxes) of proved crude oil and natural
gas reserves of $20.7 million at January 1, 1996. Acco subsequently
contributed the Properties to Portilla - 1996, L.P., a Texas limited
partnership (the "Partnership"), for a limited partnership interest. A
subsidiary of the Company, Portilla - Happy Corporation ("Portilla -
Happy"), is the general partner of the Partnership.
The aggregate purchase price received by the Company was $17.6
million, of which $2.0 million was used by Portilla - Happy to purchase a
25% equity interest in the Partnership. Prior to this payment, Portilla -
Happy did not have any interest in the Partnership. Acco separately obtained
the release of the 50% overriding royalty interest in the Portilla
Field owned by the Commingled Pension Trust Fund (Petroleum II), the
trustee of which is Morgan Guaranty Trust Company of New York (the "Trust
Fund"), for $11.9 million. As a result of the purchase of the Properties,
the Partnership is the owner of all of the Company's and the Trust Fund's
interests in the Portilla Field and all of the Company's interest in the
Happy Field. The Partnership will receive all of the revenues and
pay all expenses associated with these interests. The Partnership also
acquired certain machinery and equipment previously owned by the Company
and used at the Portilla Field and the Company's 100% interest in a
natural gas processing plant with capacity of approximately 20 million
cubic feet of natural gas per day located at the Portilla Field (the
"Plant"). The Partnership maintains bank accounts separate from those
of the Company.
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Acco financed the acquisition of the Properties by borrowing
$21.75 million from Christiana Bank og Kreditkasse (the "Bank Loan")
and $7.75 million from the Company pursuant to a demand note (the "Demand
Note"). The Bank Loan is non-recourse to Portilla - Happy and is secured by
the Properties and all of the other assets of the Partnership including
the Partnership's Available Cash (as defined in the Partnership's
Limited Partnership Agreement). The Partnership also received loans of
$5.92 million from three pension trust funds (the "Pension Fund Loans").
The proceeds of the Pension Fund Loans were used to partially repay the
Demand Note, which was assumed by the Partnership when Acco contributed the
Properties to the Partnership. The remainder of the balance of the Demand
Note and expenses incurred by the Partnership in the transaction were paid
from the equity contributions of Acco and Portilla - Happy. In connection
with making the Pension Fund Loans, the pension funds were granted an
option to purchase a 74% overriding royalty interest in the Properties
(the "ORI Options"). The ORI Options may be exercised at any time
prior to April 30, 2004 by the payment to the Partnership of $5.92
million which payment may be made either in cash, in exchange for the
outstanding principal amount of the Pension Fund Loans or by a combination
thereof.
The Company, through Portilla - Happy, owns a 25% equity interest in
the Partnership. Prior to Acco's repayment of the Bank Loan and the
receipt by Acco and Portilla - Happy of 110% of their initial
investments, Portilla - Happy will receive 8% of the Partnership's
Available Cash. After these repayment obligations have been satisfied,
Portilla - Happy will receive 25% of the Partnership's Available Cash
until the Pension Fund Loans have been repaid in full or, in the event
that the pension funds exercise the ORI Option, when the pension funds
have received an aggregate of $8.88 million plus 10% of the ORI Option
price per annum (the "Required Override Payment"). After the earlier of the
time when the Required Override Payment has been made or, if the ORI Options
are not exercised, April 30, 2004 (the date that the Pension Fund Loans
mature), Portilla - Happy's share of Available Cash will increase to
43.75% and will stay at this level until the termination of the
Partnership.
The sale of the Properties is consistent with the Company's strategy
of selling its more mature properties. Such sales enable the Company to
maintain financial flexibility, reduce overhead and redeploy the proceeds
therefrom to activities that the Company believes to have a potentially
higher financial return. The sale of the Properties enabled the Company to
repay $12.0 million to FUNB and reduce its indebtedness to FUNB to $29.5
million. At March 31, 1996, the Company's availability under the FUNB
line of credit was $1.5 million which the Company anticipates will be
used to fund development of existing properties. Of the remaining $5.6
million of the proceeds, $2.0 million was used to purchase the equity
interest in the Partnership and $3.6 million was used for general corporate
purposes, including future acquisitions and development of existing
properties. To the extent not used, the proceeds have been deposited in an
interest bearing account and will be used by the Company for its
working capital needs including future acquisitions and development of
existing properties.
11
<PAGE> 15
During 1995, the Portilla and Happy Fields contributed $4.5 million
in revenues, $0.9 million in operating and production expenses and $1.7
million in depreciation expense to the Company. The repayment of $12.0
million of the Company's indebtedness to FUNB would, on a pro forma basis
if the Properties had been sold on January 1, 1995, have reduced
interest expense by $1.2 million in 1995 and would have decreased the
Company's net income by $0.7 million in 1995. Because the Company will
remain the operator of the Portilla Field and the Plant located at the
Portilla Field (the Happy Field will continue to be operated by Torch
Operating Company), there will not be any changes in the Company's
operations as a result of the sale. The Partnership will be responsible
for the payment of all direct operating expenses associated with the
Properties and the Plant. The Company will not be reimbursed for any
of its overhead expenses in connection with the operation of the Properties
and the Plant but will be reimbursed for expenses incurred to third parties.
On March 21, 1996, the Company also announced that its Board
of Directors had authorized the repurchase of up to $3.5 million of the
Company's Common Stock. Such repurchases will be made from time to time
either through the open market or in privately negotiated transactions. As
of June 11, 1996, the Company had purchased a total of 41,000 shares of
Common Stock at an aggregate purchase price of $210,125.
In March 1996, the Compensation Committee of the Board of Directors
(the "Compensation Committee") approved a plan to amend the terms of the
Company's outstanding stock options to reduce the exercise price to $6.75
per share. Options to purchase a total of 353,810 shares, of which
68,600 shares were vested, were affected.
SELLING STOCKHOLDERS
This Prospectus relates to 3,325,000 shares of Common Stock that may
be offered and sold from time to time by the Selling Stockholders. If all of
the shares of Common Stock offered hereby are actually sold, the
Selling Stockholders will own 783,300 shares of the Common Stock.
The Selling Stockholders obtained the shares of the Common Stock
offered hereby in the Private Placement.
The following table sets forth certain information as of June 11,
1996 with respect to the ownership of Common Stock by the Selling
Stockholders:
12
<PAGE> 16
<TABLE>
<CAPTION>
Shares of Common Shares of Common Shares of Common
Name of Selling Stock Owned Prior to Stock to be Sold Stock to be Owned
Stockholder the Offering (1) Percentage Pursuant Hereto (1) After the Offering(1) Percentage
----------- ---------------- ---------- ------------------- --------------------- ----------
<S> <C> <C> <C> <C> <C>
BT Holdings (2) 275,000 4.75 275,000 0 0
Kayne, Anderson 375,000 6.48 375,000 0 0
Management, Inc. (3)
State Street Research 375,000 6.48 375,000 0 0
& Management, Inc. (4)
Ralph Wanger 516,000(5) 9.07 110,000 406,000(6) 7.00
Wellington Management 572,300 9.87 195,000 377,300 6.51
Company (7)
</TABLE>
- --------------------
(1) Does not include an aggregate of 1,995,000 shares of Common
Stock which may be issued in exchange for the CVRs.
(2) BT Holdings is an investment manager which has the power to
make investment decisions for unrelated clients.
(3) Kayne, Anderson Management, Inc. is an investment manager
which has the power to make investment decisions for unrelated
clients.
(4) State Street Research & Management, Inc. ("State Street") is an
investment manager which has the power to make investment
decisions for unrelated clients. State Street disclaims
beneficial ownership of all of the shares of Common Stock listed
above.
(5) Includes 156,000 shares of Common Stock owned by the Acorn
Investment Trust, Series Designated Acorn Fund (the "Trust").
Wanger Asset Management, Ltd. ("WAM Ltd.") is the general partner
of Wanger Asset Management, L.P. ("WAM") and Ralph Wanger is the
general partner of WAM, Ltd. WAM serves as investment advisor to
the Trust. Certain limited partners and employees of WAM are
officers and trustees of the Trust. The Trust has delegated to
WAM shared voting and investment power over the shares owned by
the Trust. Does not include shares owned by clients of WAM over
which WAM does not have or share voting or investment power.
(6) Includes 156,000 shares of Common Stock owned by WAM and 250,000
shares of Common Stock owned by the Trust.
(7) Wellington Management Company is an investment manager which has
the power to make investment decisions for unrelated clients.
The Selling Stockholders do not have any partners, officers or
directors who are officers or directors of the Company and none of
the Selling Stockholders is an officer or director of the Company.
13
<PAGE> 17
PLAN OF DISTRIBUTION
This Prospectus relates to 3,325,000 shares of Common Stock that may
be offered and sold from time to time by the Selling Stockholders.
As of June 11, 1996, the Selling Stockholders were the beneficial
owners of 2,113,300 shares of Common Stock. Assuming all shares of
Common Stock offered hereby are actually sold, the Selling Stockholders will
beneficially own an aggregate of 783,300 shares of Common Stock.
The Selling Stockholders have advised the Company that they intend to
sell all or a portion of the shares of Common Stock offered by this
Prospectus from time to time (i) in the over-the-counter market or on the
NASDAQ Stock Market at prices reasonably related to the prices of the Common
Stock prevailing at the time of such sales, (ii) otherwise than in the
over-the-counter market or on the NASDAQ Stock Market, in negotiated
transactions (which may include the pledge or hypothecation of some or all
of the shares), at fixed prices that may be changed, at market prices
prevailing at the time of sale or at prices reasonably related thereto or at
negotiated prices, or (iii) by a combination of the foregoing methods of
sale. The Selling Stockholders may effect such transactions by selling
the shares of Common Stock to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and/or the
purchasers of the shares of Common Stock for which such broker-dealers may act
as agent or to whom they may sell as principal, or both. The Company is not
aware as of the date of the Prospectus of any agreement between the Selling
Stockholders and any broker-dealers with respect to the sale of the
Shares offered by this Prospectus. The Selling Stockholders and any
broker, dealer or other agent executing sell orders on behalf of the Selling
Stockholders may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event commissions received by any such broker,
dealer or agent and profit on any resale of the shares of Common Stock
may be deemed to be underwriting commissions under the Securities Act.
Such commissions received by a broker, dealer or agent may be in excess of
customary compensation.
In effecting the sale of the Shares offered by this Prospectus,
the Selling Stockholders must comply with Rule 10b-6 under the Exchange Act,
which will require that the Selling Stockholders, as well as any person who
acts in concert with the Selling Stockholders and the broker, if any, who
sells the Shares on behalf of the Selling Stockholders, suspend all purchases
of shares of the Common Stock at least two business days prior to and during
any offers and sales by the Selling Stockholders of the Shares offered by
this Prospectus. Because the Selling Stockholders may be deemed to be
affiliates of the Company under the Exchange Act, Rule 10b-6 also requires the
Company and all persons who are in a control relationship with the Company
to suspend all purchases of shares of the Common Stock at least two
business days prior to and during any offers and sales by the Selling
Stockholders of the Shares offered by this Prospectus. The Company will
require the Selling Stockholders, and their underwriters, brokers or
dealers, if applicable, to provide a
14
<PAGE> 18
letter that acknowledges compliance with Rule 10b-6 before authorizing
the transfer of the Selling Stockholders' Shares.
DESCRIPTION OF CAPITAL STOCK
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock,
par value $.01 per share. At June 11, 1996, there were 5,804,812 shares of
Common Stock issued and outstanding. Holders of the Common Stock are entitled
to cast one vote for each share held of record on all matters submitted to a
vote of stockholders and are not entitled to cumulate votes for the
election of directors. Holders of Common Stock do not have preemptive rights
to subscribe for additional shares of Common Stock issued by the Company.
Holders of the Common Stock are entitled to receive dividends as may
be declared by the Board of Directors out of funds legally available
therefor, subject to the rights of the holders of the Series 1995-B Preferred
Stock and any subsequently issued classes or series of the Company s Preferred
Stock. No dividend may be declared or paid on the Common Stock and no Common
Stock may be purchased by the Company, unless all accrued and unpaid
dividends on the outstanding Series 1995-B Preferred Stock for all past or
current dividend periods, if any, have been paid, except for a purchase of
shares of the Common Stock by the Company pursuant to Rule 13e-4(h)(5) of
the Exchange Act. In addition, under the terms of the Company's Credit
Agreement with FUNB, the Company may not pay dividends on shares of the
Common Stock. In the event of liquidation, holders of the Common Stock are
entitled to share pro rata in any distribution of the Company s assets
remaining after payment of liabilities, subject to the preferences and
rights of the holders of the Series 1995-B Preferred Stock. All of the
outstanding shares of the Common Stock are fully paid and nonassessable.
References herein to Common Stock include the common share purchase
rights distributed by the Company to its stockholders on November 17, 1994 as
long as they trade with the Common Stock. See "Stockholder Rights Plan".
Preferred Stock
General. The Company s Articles of Incorporation authorize the
issuance of up to 1,000,000 shares of Preferred Stock, par value $.01 per
share, in one or more series. The Board of Directors is authorized,
without any further action by the stockholders, to determine the dividend
rights, dividend rate, conversion rights, voting rights, rights and terms of
redemption, liquidation preferences, sinking fund terms and other rights,
preferences, privileges and restrictions of any series of Preferred Stock, the
number of shares constituting any such series, and the designation thereof.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of holders of any Preferred Stock that may be
issued in the future.
15
<PAGE> 19
Description of Series 1995-B Preferred Stock. The Company is
authorized to issue 1,000,000 shares of Preferred Stock, of which 45,741
shares have been designated as the Series 1995-B Preferred Stock. The
holders of the Series 1995-B Preferred Stock have the full right and power to
vote with the holders of the Common Stock on all matters on which the
stockholders of the Common Stock are entitled to vote. Holders of the Series
1995-B Preferred Stock are entitled to 11.11 votes for each share of the
Series 1995-B Preferred Stock and are not entitled to cumulate votes in the
election of directors. Holders of the Series 1995-B Preferred Stock do not
have preemptive rights to subscribe for or to purchase any additional shares
of the Series 1995-B Preferred Stock. All or any shares of the Series 1995-B
Preferred Stock may be redeemed at the option of the Company at any time
after January 1, 1997 at $100 per share plus the amount of accrued and unpaid
dividends. If the Company redeems, repurchases, exchanges any security or
property for, or otherwise acquires for consideration any shares of Common
Stock (other than an acquisition pursuant to Rule 13e-4(h)(5)
promulgated under the Exchange Act) at a price equal to or greater than
$100 divided by the number of shares of Common Stock into which one share
of the Series 1995-B Preferred Stock is then convertible, any holder of
shares of Series 1995-B Preferred Stock may require the Company to redeem
a number of shares of such holder's Series 1995-B Preferred Stock equal to
the product of (i) the percentage of the shares of the Common Stock so
redeemed or otherwise acquired times (ii) the total number of shares of the
Series 1995-B Preferred Stock held by such holder at a price per share equal
to the product of (x) the number of shares of Common Stock that such holder
s shares of Series 1995-B Preferred Stock is then convertible times (y) the
per share price paid for a share of Common Stock by the Company plus all
accrued and unpaid dividends. Each share of Series 1995-B Preferred
Stock may be converted, subject to adjustment, into 11.11 shares of the
Common Stock.
Shares of the Series 1995-B Preferred Stock are entitled to a
cumulative dividend of $8.00 per share per annum payable on a quarterly basis,
when and if declared by the Board of Directors. In the event of the
dissolution, liquidation or winding up of the Company, the holders of the
Series 1995-B Preferred Stock shall be entitled to receive an amount of
money equal to the redemption price per share plus all accrued and unpaid
dividends thereon in cash or in any assets of the Company remaining after the
debts of the Company have been paid in full and before any payment is made or
assets set aside for payment to the holders of the Common Stock. All
outstanding shares of the Series 1995-B Preferred Stock are fully paid and
nonassessable.
Contingent Value Rights
General. The CVRs were issued under the CVR Agreement (the
"CVR Agreement") between the Company and FUNB, a form of which is filed as an
exhibit to the Registration Statement of which this Prospectus is a
part. The definitions of certain capitalized terms used in the following
summary are set forth below under "Certain Definitions."
16
<PAGE> 20
Issuance of Shares at Maturity Date or Extended Maturity Date. The
CVR Agreement provides that, subject to adjustment as described under
"Antidilution" below, the Company shall issue to each holder of the CVRs
(each such person, a "CVR Holder") on the Maturity Date (as defined below),
unless the Company shall, in its sole discretion, extend the Maturity Date to
the Extended Maturity Date (as defined below), then on the Extended Maturity
Date, for each CVR held by such CVR Holder, the Company shall issue a number
of shares of Common Stock, if any, equal to (a) the Target Price (as defined
below) minus the Current Market Value divided by (b) the Current Market
Value; provided, however, in no event shall more than one share of Common
Stock be issued in exchange for each CVR at the Maturity Date or more than 1.5
shares of Common Stock be issued in exchange for each CVR at the Extended
Maturity Date. Such determination by the Company absent manifest error
shall be final and binding on the Company and the CVR Holder.
The Company may at its option extend the Maturity Date to the
Extended Maturity Date. Such option shall be exercised by (i) publishing
notice of an extension in the Authorized Newspaper (as defined below) or
(ii) furnishing notice to the CVR Holders of such extension, in each case,
not less than one business day preceding the Maturity Date ; provided,
however, that no defect in any such notice shall affect the validity of the
extension of the Maturity Date to the Extended Maturity Date, and that any
notice when published and mailed to a CVR Holder whether or not actually
received by such CVR Holder.
Determination that No Shares are Issuable With Respect to the CVRs.
If the Current Market Value of a share of the Common Stock equals or exceeds
$10.00 on the Maturity Date or $12.50 on the Extended Maturity Date (if the
Maturity Date is extended by the Company to the Extended Maturity Date), as
the case may be, no shares of the Common Stock will be issuable with respect to
the CVRs. In addition, the CVRs will terminate if the Per Share Market
Value (as defined below) equals or exceeds the Target Price for any
period of 30 consecutive Trading Days during either the period (i) from and
after November 17, 1995 to and including November 17, 1996 or (ii) from and
after November 17, 1996 to and including November 17, 1997.
In the event that the Company determines that no shares of the
Common Stock are issuable with respect to the CVRs to the CVR Holders, the
Company shall give to the CVR Holders notice of such determination. Upon
making such determination and absent manifest error, the CVRs shall
terminate and become null and void and the CVR Holders shall have no
further rights with respect thereto. The failure to give such notice or any
defect therein shall not affect the validity of such determination.
Antidilution. In the event the Company shall in any manner subdivide
(by stock split, stock dividend or otherwise) or combine (by reverse stock
split or otherwise) the number of outstanding shares of the Common Stock,
the Company shall similarly subdivide or combine the CVRs and shall
approximately adjust the Target Price.
17
<PAGE> 21
Whenever such an adjustment is made, the Company shall (i) promptly
prepare a certificate setting forth such adjustment and a brief statement of
the facts accounting for such adjustment, (ii) promptly file with FUNB a
copy of such certificate and (iii) mail a brief summary thereof to each CVR
Holder. FUNB shall be fully protected in relying on any such certificate
and on any adjustment therein contained. Such adjustment absent manifest
error shall be final and binding on the Company and the CVR Holders. Each
outstanding CVR Certificate shall thenceforth represent that number of
adjusted CVRs necessary to reflect such subdivision or combination and
reflect the adjusted Target Price.
Consolidation, Merger and Sale of Assets. The CVR Agreement provides that
the Company may, without the consent of the holders of any of the outstanding
CVRs, consolidate with or merge into any other entity or convey, transfer or
lease its properties and assets substantially as an entirety to any entity,
provided that (i) the Surviving Person (as defined below) assumes the Company's
obligations under the CVRs and the CVR Agreement and (ii) the Company delivers
to FUNB an officer's certificate regarding compliance with the foregoing. For
the purposes hereof, "convey, transfer or lease its properties and assets
substantially as an entirety" shall mean properties and assets contributing in
the aggregate of at least 80% of the Company's total revenues as reported in the
Company's last available periodic financial report (quarterly or annual, as the
case may be) filed with the Commission.
In the event that the Company were merged out of existence, liquidated or
subject to some other event resulting in the lack of any market for the Common
Stock (each, a "Transaction"), the holders of the CVRs would be entitled to
receive securities of the Surviving Person or such other consideration that
holders of shares of the Common Stock received in such a Transaction on the
basis described herein. In the event of a Transaction in which the
consideration received by the stockholders of the Company were shares of
capital stock or other securities of the Surviving Person, the CVRs would
mature on the Maturity Date (or the Extended Maturity Date, if extended by the
Surviving Person), the Target Price would be adjusted by dividing the Target
Price by the Conversion Ratio (as defined below) and the holders of the CVRs
would receive on the Maturity Date (or if extended by the Surviving Person, the
Extended Maturity Date) a number of shares of the capital stock or other
securities of the Surviving Person equal to (a) the Adjusted Target Price
(as defined below) minus the Adjusted Current Market Value (as defined
below) divided by (b) the Adjusted Current Market Value; provided,
however, in no event shall the Surviving Person (a) be required to issue a
number of shares of its capital stock or other securities greater than 1.0 times
the Conversion Ratio at the Maturity Date or more than 1.5 times the Conversion
Ratio at the Extended Maturity Date and (b) issue shares of its capital stock or
other securities which are not publicly traded to the holders of the CVRs for
any CVRs held by them. In the event that the shares of capital stock or other
securities of the Surviving Person to be issued in a Transaction are not
publicly traded, the consideration to be received by the holders of the CVRs for
any CVRs held by them shall be cash calculated in the manner described in the
following sentence. In the
18
<PAGE> 22
event of a Transaction in which the holders of
the Company's Common Stock received cash, the holders of the CVRs would receive
cash in an amount equal to the Adjusted Target Price minus the cash received
by the stockholders of the Company for one share of the Common Stock on the
effective date of such a Transaction; provided, however that the holders of the
CVRs would not receive greater than $5.00 per CVR in cash on or prior to the
Maturity Date and $7.50 per CVR in cash from and after the Maturity Date to
and including the Extended Maturity Date.
Certain Definitions.
"Adjusted Current Market Value" per share means, with respect to
the Maturity Date or the Extended Maturity Date, the median of the averages
of the closing bid prices of the shares of capital stock or other securities
of the Surviving Person received by the holders of Common Stock in a
Transaction on the principal stock exchange on which such shares of
capital stock or other securities are traded during each 20 consecutive
Trading Day period that both begins and ends in the Valuation Period.
"Adjusted Target Price" means the Target Price divided by the
Conversion Ratio.
"Authorized Newspaper" means The Wall Street Journal, or if The
Wall Street Journal shall cease to be published, or, if the publication or
general circulation of The Wall Street Journal shall be suspended for
whatever reason, such other English language newspaper as is selected by the
Company with general circulation in The City of New York, New York.
"Conversion Ratio" means the number of shares of capital stock or
other securities of the Surviving Person received by the holder of one (1)
share of the Common Stock.
"Current Market Value" means with respect to the Maturity Date and
the Extended Maturity Date, the median of the averages of the closing bid
prices on the NASDAQ Stock Market (or, if the Common Stock is listed on a
securities exchange, on such exchange) of shares of the Common Stock
during each 20 consecutive trading day period that both begins and ends
in the Valuation Period.
"Extended Maturity Date" means November 17, 1997.
"Maturity Date" means November 17, 1996.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the principal stock
exchange on which
19
<PAGE> 23
the Common Stock has been listed or, if there is no such price on such
date, then the average of such prices on such exchange on the date nearest
preceding such date, or (b) if the Common Stock is not listed on any stock
exchange, the average of the high and low sales prices for a share of
Common Stock in the over-the-counter market, as reported by the NASDAQ Stock
Market for such date, or, if there are no such prices on such date, then the
average of such prices on the date nearest preceding such date, or (c) if the
Common Stock is not quoted on the NASDAQ Stock Market, the average of the
final bid and final asked prices for a share of Common Stock in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its
functions of reporting prices), or (d) if the Common Stock is no longer
publicly traded, as determined by a nationally recognized or major regional
investment banking firm or firm of independent certified public
accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Company) selected in good
faith by the Board of Directors of the Company.
"Surviving Person" means any other Person into which the Company
shall consolidate with or merge into or the Person which acquires by
conveyance or transfer or which leases, the properties and assets of the
Company substantially as an entirety.
"Target Price" means (i) at the Maturity Date, $10.00 and (ii) at
the Extended Maturity Date, $12.50. In each case, upon each occurrence of an
event specified under "Antidilution" above, such amounts, as they may
have been previously adjusted, shall be adjusted as described under
"Antidilution" above.
"Trading Day" means (a) a day on which the Common Stock is traded on
the principal stock exchange on which the Common Stock has been listed, or
(b) if the Common Stock is not listed on any stock exchange, a day on which
the Common Stock is traded in the over-the-counter market, as reported by the
NASDAQ Stock Market, or (c) if the Common Stock is not traded on the NASDAQ
Stock Market, a day on which the Common Stock is traded in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its
functions of reporting prices).
"Valuation Period" means the 60 Trading Day period immediately
preceding (and including) the Maturity Date or the Extended Maturity Date, as
the case may be.
Warrants
The Company has warrants ("Warrants") outstanding to purchase an
aggregate of 437,500 shares of Common Stock. Associated Energy Managers,
Inc. ("AEM"), has Warrants to purchase 13,500 shares at an exercise price of
$7.00 per share. FUNB has Warrants to purchase 424,000 shares of Common
Stock at an exercise price of $9.79 per share. These Warrants were issued to
FUNB in connection with the Company's credit agreement. FUNB and AEM have
certain registration rights with
20
<PAGE> 24
respect to shares of the Common Stock issued pursuant to the exercise of
such Warrants. See "Description of Capital Stock -- Registration Rights."
All outstanding Warrants contain provisions that protect AEM and
FUNB against dilution by adjusting the price at which the Warrants are
exercisable and the number of shares of the Common Stock issuable upon exercise
thereof upon the occurrence of certain events, including payment of stock
dividends and distributions, stock splits, recapitalizations,
reclassifications, mergers, consolidations or the issuance or sale of
Common Stock or options, rights or securities convertible into shares of the
Common Stock, in the case of AEM, at less than the current market price or, in
the case of FUNB, at a price less than the greater of the current market
price or the exercise price. A holder of Warrants has no rights as a
stockholder of the Company until the Warrants are exercised. All Warrants
are currently exercisable, although none have been exercised as of the date
hereof.
Registration Rights
The shares of the Common Stock to be received by AEM and FUNB
upon exercise of Warrants and any shares of the Common Stock owned by
Endowment Energy Partners, L.P. ("EEP") and Endowment Energy Partners
II, Limited Partnership ("EEP II") are entitled to certain rights with
respect to the registration of such shares under the Securities Act.
Under the terms of the Registration Rights Agreement with EEP and EEP
II, in the event that the Company proposes to register any shares of the
Common Stock or securities convertible into Common Stock under the Securities
Act for its own account, except in certain circumstances, EEP and EEP II are
entitled to unlimited Piggyback Registrations, subject to the right of the
underwriters of any such offering to limit the number of shares included in
such registration. The Company has agreed to pay all expenses in
connection with a Piggyback Registration except for underwriting discounts
and selling commissions which shall be borne by EEP and/or EEP II with
respect to shares of the Common Stock owned by EEP and EEP II other than the
211,500 shares of Common Stock acquired by EEP and EEP II through the exercise
of the Warrants formerly owned by EEP and EEP II ("Warrant Shares"). EEP and
EEP II have the additional right to require the Company to effect one Demand
Registration of all shares of the Common Stock (other than Warrant Shares)
in the aggregate at any time and the Company is required to effect such
registration, subject to certain conditions and limitations. The
Company is required to bear the expenses of a Demand Registration
except for underwriting discounts and selling commissions which shall be
borne by EEP and/or EEP II with respect to shares of Common Stock owned by EEP
and EEP II other than Warrant Shares. The Company has agreed to customary
indemnities including an agreement to indemnify, subject to certain
limited exceptions, EEP and EEP II in connection with a Demand
Registration and a Piggyback Registration.
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<PAGE> 25
Under the terms of its Warrants, AEM has the right to unlimited
Piggyback Registrations. EEP and EEP II have the right to one Demand
Registration in the aggregate at any time after December 20, 1995 and
unlimited Piggyback Registrations with respect to Warrant Shares. The
Company has agreed to pay all expenses in connection with Piggyback
Registrations by AEM and by EEP and EEP II with respect to Warrant Shares and
to share expenses equally with EEP and EEP II with respect to Warrant Shares
registered in a Demand Registration; provided, however, all underwriting
discounts and selling commissions shall be borne by EEP, EEP II or AEM, as
the case may be.
Under the terms of its Warrants, FUNB has the right to two
Demand Registrations and, subject to the rights to Piggyback Registration of
EEP, EEP II and AEM, unlimited Piggyback Registrations. The Company
will pay all expenses incurred in connection with any such
registration other than underwriting discounts and selling commissions
which shall be borne by First Union. The Company has also agreed to
customary indemnities, including an agreement to indemnify, subject to
certain limitations, First Union in connection with a Demand Registration
and a Piggyback Registration.
Anti-takeover Statutes
The Nevada General Corporation Law ("Nevada GCL") contains two
provisions, described below as "Combination Provisions" and the "Control
Share Act," that may make more difficult the accomplishment of unsolicited or
hostile attempts to acquire control of a corporation through certain types of
transactions.
Restrictions on Certain Combinations Between Nevada Resident
Corporations and Interested Stockholders. The Nevada GCL includes certain
provisions (the "Combination Provisions") prohibiting certain "combinations"
(generally defined to include certain mergers, disposition of assets
transactions, and share issuance or transfer transactions) between a resident
domestic corporation and an "interested stockholder" (generally defined to be
the beneficial owner of 10% or more of the voting power of the outstanding
shares of the corporation), except those which are approved by the board of
directors before the interested stockholder first obtained a 10% interest in
the corporation s stock. There are additional exceptions to the prohibition,
which apply to combinations if they occur more than five years after the
interested stockholder s date of acquiring shares. The Combination Provisions
apply unless the corporation elects against their application in its
original articles of incorporation or an amendment thereto, or in its
bylaws. The Company's Articles of Incorporation and Bylaws do not
currently contain a provision rendering the Combination Provisions
inapplicable.
Nevada Control Share Act. Nevada s Control Share Acquisition Act
(the "Control Share Act") imposes procedural hurdles on and curtails
greenmail practices of corporate raiders. The Control Share Act
temporarily disenfranchises the voting power
22
<PAGE> 26
of "control shares" of a person or group ("Acquiring Person") purchasing
a "controlling interest" in an "issuing corporation" (as defined in the
Nevada GCL) not opting out of the Control Share Act. In this regard, the
Control Share Act will apply to an "issuing corporation" unless, before an
acquisition is made, the articles of incorporation or bylaws in effect on
the tenth day following the acquisition of a controlling interest
provide that it is inapplicable. The Company s Articles of
Incorporation and Bylaws do not currently contain a provision rendering the
Control Share Act inapplicable.
Under the Control Share Act, an "issuing corporation" is a
corporation organized in Nevada which has 200 or more stockholders, at least
100 of whom are stockholders of record (which for this purpose includes
registered and beneficial owners) and residents of Nevada, and which does
business in Nevada directly or through an affiliated company. The status of
the Company at the time of the occurrence of a transaction governed by
the Control Share Act (assuming that the Company s Articles of
Incorporation or Bylaws have not theretofore been amended to include an
opting out provision) would determine whether the Control Share Act is
applicable.
The Control Share Act requires an Acquiring Person to take
certain procedural steps before he or it can obtain the full voting power of
the control shares. "Control shares" are the shares of a corporation (1)
acquired or offered to be acquired which will enable the Acquiring
Person to own a "controlling interest," and (2) acquired within 90 days
immediately preceding that date. A "controlling interest" is defined as the
ownership of shares which would enable the Acquiring Person to exercise
certain graduated amounts (beginning with one-fifth) of all voting power
of the corporation. The Acquiring Person may not vote any control
shares without first obtaining approval from the stockholders not
characterized as "interested stockholders" (as defined below).
To obtain voting rights in control shares, the Acquiring Person must
file a statement at the principal office of the issuer ("Offeror s
Statement") setting forth certain information about the acquisition or
intended acquisition of stock. The Offeror s Statement may also request
a special meeting of stockholders to vote on the issue of whether to grant
to the Acquiring Person voting rights in his control shares. A special
stockholders meeting must then be held at the Acquiring Person's expenses
within 30 to 50 days after the Offeror s Statement is filed. If a
special meeting is not requested by the Acquiring Person, the matter will be
addressed at the next regular or special meeting of stockholders.
At the special or annual meeting at which the issue of voting rights
of control shares will be addressed, "interested stockholders" may not vote on
the question of granting voting rights to control the corporation or its
parent, unless (with respect to corporations with more than 100 stockholders of
record) a bylaw provision adopted by the affirmative vote of a
majority of the outstanding shares entitled to vote thereon authorizes
the disinterested directors alone to approve such voting rights.
23
<PAGE> 27
If full voting power is granted to the Acquiring Person by
the disinterested stockholders, and the Acquiring Person has acquired control
shares with a majority or more of the voting power, then (unless otherwise
provided in the articles of incorporation or bylaws in effect on the tenth day
following the acquisition of a controlling interest) all stockholders of
record, other than the Acquiring Person, who have not voted in favor of
authorizing voting rights for the control shares, must be sent a notice
advising them of the fact and of their right to receive "fair value" for their
shares. The Company s Articles of Incorporation and Bylaws do not provide
otherwise. Within 20 days of the mailing of the notice, any such
stockholder may demand to receive from the corporation the "fair value" for
all or part of his shares. "Fair value" is defined in the Control Share
Act as "not less than the highest price per share paid by the Acquiring
Person in an acquisition." Allowing the dissenting stockholders to receive
"fair value" for all or part of their shares is intended to avoid the
"prisoner s dilemma" of forcing a stockholder to sell to an Acquiring
Person at an early date so as not to risk diminution in value that may occur
after the Acquiring Person gains the controlling interest.
The Control Share Act permits a corporation to redeem the control
shares in the following two instances, if so provided in the articles of
incorporation or bylaws of the corporation in effect on the tenth day
following the acquisition of a controlling interest: (1) if the Acquiring
Person fails to deliver the Offeror s Statement to the corporation within 10
days after the Acquiring Person s acquisition of the control shares; or
(2) an Offeror s Statement is delivered, but the control shares are not
accorded full voting rights by the stockholders. The Company s Articles of
Incorporation and Bylaws do not address this matter.
Anti-takeover Effects of Certain Provisions of the Articles of Incorporation
and Bylaws
Certain provisions of the Articles of Incorporation and the Bylaws of
the Company could have an anti-takeover effect.
The Articles of Incorporation and Bylaws provide for the Board
of Directors to be divided into three classes of directors serving staggered
three- year terms. As a result, approximately one-third of the Board of
Directors will be elected each year. The Articles of Incorporation and Bylaws
provide that the Board of Directors will consist of not less than three nor
more than twelve members, with the exact number to be determined from
time to time by the affirmative vote of a majority of directors then in
office. The Board of Directors, and not the stockholders, has the authority
to determine the number of directors, and could prevent any stockholder
from obtaining majority representation on the Company s Board of Directors
by enlarging the Board of Directors and by filling the new directorships
with the stockholder s own nominees. In addition, directors may be removed
by the stockholders only for cause.
The Articles of Incorporation and Bylaws provide that special meetings
of stockholders of the Company may be called only by the Chairman of the Board,
the
24
<PAGE> 28
President or a majority of the members of the Board of Directors.
This provision may make it more difficult for stockholders to take actions
opposed by the Board of Directors.
The Articles of Incorporation and Bylaws provide that any action
required to be taken or which may be taken by holders of Common Stock must be
effected at a duly called annual or special meeting of such holders, and may
not be taken by any written consent of such stockholders. These provisions
may have the effect of delaying consideration of a stockholder proposal
until the next annual meeting unless a special meeting is called by the
persons set forth above. The provisions of the Articles of Incorporation and
Bylaws prohibiting stockholder action by written consent would prevent the
holders of a majority of the voting power of the Company from using the
written consent procedure to take stockholder action and taking action
by consent without giving all the stockholders of the Company entitled
to vote on a proposed action the opportunity to participate in
determining such proposed action.
Stockholder Rights Plan
On November 17, 1994, the Board of Directors of the Company adopted
a stockholder rights plan (the "Rights Plan"). Under the terms of the
Rights Plan, the Board of Directors of the Company declared a dividend of one
common share purchase right ("Right") on each share of the Common Stock
outstanding on November 17, 1994. Each Right entitles the holder thereof to
buy one-half of one share of Common Stock at an exercise price of $40 per
share ($20 per half share), subject to adjustment.
The Rights are not exercisable until the occurrence of specified
events. Upon the occurrence of such an event (which events are generally
those which would signify the commencement of a hostile bid to acquire the
Company), the Rights then become exercisable (unless redeemed by the Board of
Directors) for a number of shares of Common Stock having a market value
of four times the exercise price of the Right. If the acquiror were to
conclude the acquisition of the Company, the Rights would then become
exercisable for shares of the controlling/ surviving corporation having a
value of four times the exercise price of the Rights. If the Rights were
exercised at any time, significant dilution would result, thus making the
acquisition prohibitively expensive for the acquiror. In order to encourage
a bidder to negotiate with the Board of Directors, the Rights Plan provides
that the Rights may be redeemed under prescribed circumstances by the Board
of Directors.
The Rights are not intended to prevent a takeover of the Company and
will not interfere with any tender offer or business combination approved
by the Board of Directors. The Rights Plan is intended to protect the
stockholders in the event of (a) an unsolicited offer to acquire the Company,
including offers that do not treat all stockholders equally, (b) the
acquisition in the open market of shares constituting control of the Company
without offering fair value to all stockholders, and (c) other
25
<PAGE> 29
coercive takeover tactics which could impair the Board s ability to
fully represent the interests of the stockholders.
Limitation of Liability of Officers and Directors
The Company's Articles of Incorporation contain a provision
that eliminates the personal monetary liability of directors and officers
to the Company and its stockholders for a breach of fiduciary duties to
the extent currently allowed under the Nevada General Corporation Law
(the "Nevada Statute"). If a director or officer were to breach his
fiduciary duties, neither the Company nor its stockholders could recover
monetary damages, and the only course of action available to the Company's
stockholders would be equitable remedies, such as an action to enjoin or
rescind a transaction involving a breach of fiduciary duty. To the extent
certain claims against directors or officers are limited to equitable
remedies, this provision of the Company's Articles of Incorporation may
reduce the likelihood of derivative litigation and may discourage stockholders
or management from initiating litigation against directors or officers for
breach of their duty of care. Additionally, equitable remedies may not be
effective in many situations. If a stockholder's only remedy is to
enjoin the completion of the Board of Director's action, this remedy would
be ineffective if the stockholder did not become aware of a transaction
or event until after it had been completed. In such a situation, it is
possible that the stockholders and the Company would have no effective remedy
against the directors or officers.
Liability for monetary damages has not been eliminated for acts
or omissions which involve intentional misconduct, fraud or a knowing violation
of law or payment of an improper dividend in violation of section 78.300 of
the Nevada Statute. The limitation of liability also does not eliminate or
limit director liability arising in connection with causes of action brought
under the Federal securities laws.
Indemnification of Officers and Directors
The Nevada Statute permits a corporation to indemnify certain
persons, including officers and directors, who are (or are threatened to be
made) parties against all expenses (including attorneys' fees) actually
and reasonably incurred by, or imposed upon, him in connection with the
defense by reason of his being or having been a director or officer if he acted
in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful, except where he has been adjudged by a court of
competent jurisdiction (and after exhaustion of all appeals) to be liable
for gross negligence or willful misconduct in the performance of his
duty. The Bylaws of the Company provide indemnification to the same extent
allowed pursuant to the foregoing provisions of the Nevada Statute.
26
<PAGE> 30
Nevada corporations also are authorized to obtain insurance to
protect officers and directors from certain liabilities, including
liabilities against which the corporation cannot indemnify its directors and
officers. The Company does not currently have in effect a directors' and
officers' liability insurance policy.
The Company has entered into indemnity agreements with each of
its directors and officers. These agreements provide for indemnification to
the extent permitted by the Nevada Statute.
Transfer Agent
The transfer agent for the Common Stock, the Series 1995-B Preferred
Stock and the CVRs is FUNB.
SHARES ELIGIBLE FOR FUTURE SALE
At June 11, 1996, the Company had 5,804,812 shares of Common
Stock outstanding of which 427,335 shares were held by affiliates. Of the
shares held by non-affiliates, 1,330,000 shares were sold in November 1995
in the Private Placement. In addition, at June 11, 1996, the Company had
409,810 shares of Common Stock subject to outstanding options granted under
certain stock option plans (of which 68,600 shares were vested at June 11,
1996), 437,500 shares issuable upon exercise of warrants and up to 1,330,000
shares of Common Stock issuable upon maturity of the CVRs in November 1996 or,
if the Company elects to extend the maturity date of the CVRs, up to 1,995,000
shares of Common Stock in November 1997. The actual number of shares issuable
upon maturity of the CVRs is dependent upon the difference between the Target
Price on the Maturity Date or the Extended Maturity Date, as the case may be
and the Current Market Value of the Common Stock. All of the shares of
Common Stock held by affiliates are restricted or control securities under Rule
144 promulgated under the Securities Act. The shares of Common Stock
issuable upon exercise of the stock options have been registered under the
Securities Act. In addition, the shares of Common Stock issuable upon
maturity of the CVRs have been registered under the Securities Act and the
shares of the Common Stock issuable upon exercise of the warrants are subject
to certain registration rights and, therefore, will be eligible for resale
in the public market after a registration statement covering such shares has
been declared effective. Sales of shares of Common Stock under Rule 144 or
pursuant to a registration statement could have a material adverse effect on
the price of the Common Stock and could impair the Company's ability to raise
additional capital through the sale of its equity securities.
In general, under Rule 144, any non-affiliate who has beneficially
owned restricted securities for at least three years may resell such
restricted securities in the public market without restriction under Rule 144.
Under Rule 144, any person who has beneficially owned restricted securities
for at least two years, and any affiliate of the Company who owns unrestricted
securities, is entitled to sell, within any three-month
27
<PAGE> 31
period, a number of such securities that does not exceed the greater of 1%
of the then outstanding shares of the Company's Common Stock (approximately
58,048 shares) or the average weekly trading volume during the four
calendar weeks preceding the date on which notice of such sale was filed
under Rule 144, provided certain requirements concerning availability of
public information, manner of sale and notice of sale are satisfied.
The Company has filed registration statements on Form S-8 under
the Securities Act to register shares of Common Stock reserved for issuance
under the Abraxas Petroleum Corporation 1984 Incentive Stock Option Plan, the
Abraxas Petroleum Corporation 1984 Non-Qualified Stock Option Plan, the
Abraxas Petroleum Corporation 1993 Key Contributor Stock Option Plan and the
Abraxas Petroleum Corporation 1994 Long Term Incentive Plan, thus permitting
the resale of shares issued under those plans by nonaffiliates in the public
market without restriction under the Securities Act. As of June 11, 1996,
options granted under stock option plans to purchase 409,810 shares of
Common Stock were outstanding, of which 68,600 shares were vested. See
"Risk Factors - Shares Eligible for Future Sale".
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will
be passed upon for the Company and the Selling Stockholders by Cox &
Smith Incorporated, San Antonio, Texas.
EXPERTS
The consolidated financial statements and financial statement schedules
of the Company included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon, included
therein and incorporated herein by reference. Such consolidated financial
statements and financial statement schedules are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The historical reserve information prepared by DeGolyer and
MacNaughton incorporated by reference in this Prospectus has been
included herein in reliance upon the authority of that firm as experts
with respect to matters contained in such reserve report.
28
<PAGE> 32
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFERS OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOT ANY SALE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF THE TIME SUBSEQUENT TO ITS
DATE.
29
<PAGE> 33
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . 2
Additional Information . . . . . . . . . . . . . . . . . . . . . . 2
Documents Incorporated by Reference . . . . . . . . . . . . . . . . 2
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . 10
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . 12
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . 14
Description of Capital Stock . . . . . . . . . . . . . . . . . . . 15
Shares Eligible for Future Sale . . . . . . . . . . . . . . . . . . 27
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
<PAGE> 34
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table indicates the expenses to be incurred in
connection with the issuance and distribution of the securities
described in this registration statement, other than underwriting discounts
and commissions. The Company will pay all such expenses.
<TABLE>
<S> <C>
SEC registration fee $8,170
Blue sky fees and expenses 3,000
Accounting fees and expenses 3,000
Legal fees and expenses 10,000
Fees of Transfer Agent and Registrar 2,000
Printing and engraving fees and expenses 5,000
Miscellaneous 5,000
-----
TOTAL $36,170
=======
</TABLE>
Item 15. Indemnification of Directors and Officers
The Company's Articles of Incorporation contain a provision
that eliminates the personal monetary liability of directors and officers
to the Company and its stockholders for a breach of fiduciary duties to
the extent currently allowed under the Nevada General Corporation Law
(the "Nevada Statute"). If a director or officer were to breach his
fiduciary duties, neither the Company nor its stockholders could recover
monetary damages, and the only course of action available to the Company's
stockholders would be equitable remedies, such as an action to enjoin or
rescind a transaction involving a breach of fiduciary duty. To the extent
certain claims against directors or officers are limited to equitable
remedies, this provision of the Company's Articles of Incorporation may
reduce the likelihood of derivative litigation and may discourage stockholders
or management from initiating litigation against directors or officers for
breach of their duty of care. Additionally, equitable remedies may not be
effective in many situations. If a stockholder's only remedy is to
enjoin the completion of the Board of Director's action, this remedy would
be ineffective if the stockholder did not become aware of a transaction
or event until after it had been completed. In such a situation, it is
possible that the stockholders and the Company would have no effective remedy
against the directors or officers.
II-1
<PAGE> 35
Liability for monetary damages has not been eliminated for acts
or omissions which involve intentional misconduct, fraud or a knowing violation
of law or payment of an improper dividend in violation of section 78.300 of
the Nevada Statute. The limitation of liability also does not eliminate or
limit director liability arising in connection with causes of action brought
under the Federal securities laws.
The Nevada Statute permits a corporation to indemnify certain
persons, including officers and directors, who are (or are threatened to be
made) parties against all expenses (including attorneys' fees) actually
and reasonably incurred by, or imposed upon, him in connection with the
defense by reason of his being or having been a director or officer if he acted
in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful, except where he has been adjudged by a court of
competent jurisdiction (and after exhaustion of all appeals) to be liable
for gross negligence or willful misconduct in the performance of duty.
The Bylaws of the Company provide indemnification to the same extent allowed
pursuant to the foregoing provisions of the Nevada Statute.
Nevada corporations also are authorized to obtain insurance to
protect officers and directors from certain liabilities, including
liabilities against which the corporation cannot indemnify its directors and
officers. The Company does not currently have in effect a directors' and
officers' liability insurance policy.
The Company has entered into indemnity agreements with each of
its directors and officers. These agreements provide for indemnification to
the extent permitted by the Nevada Statute.
Item 16. Exhibits and Financial Statement Schedules.
**3.1 Articles of Incorporation of Registrant. (Filed as Exhibit 3.1
to Registrant's Form S-4 Registration Statement, Registration Statement No.
33- 36565).
**3.2 Articles of Amendment to the Articles of Incorporation of
Registrant dated October 22, 1990 (Filed as Exhibit 3.3 to the S-4 Registration
Statement).
**3.3 Articles of Amendment to the Articles of Incorporation of
the Registrant dated December 18, 1990. (Filed as Exhibit 3.4 to the
S-4 Registration Statement).
***3.4 Articles of Amendment to the Articles of Incorporation of
Registrant dated June 8, 1995.
***3.5 Amended and Restated Bylaws of the Registrant.
II-2
<PAGE> 36
***3.6 Certificate of Designation of Series 1995-B Preferred Stock.
**4.1 Specimen Common Stock Certificate of the Registrant. (Filed
as Exhibit 4.1 to the S-4 Registration Statement).
**4.2 Specimen Preferred Stock Certificate of the Registrant. (Filed
as Exhibit 4.2 to Registrant's Annual Report on Form 10-K filed on March 31,
1995).
**4.3 Rights Agreement dated as of December 6, 1994 between the
Registrant and FUNB. (Filed as Exhibit 4.1 to the Registrant's Registration
Statement on Form 8-A filed on December 6, 1994).
**4.4 Contingent Value Rights Agreement dated November 17, 1995 by
and between Registrant and FUNB (Filed as Exhibit 4.1 to Registrant's Current
Report on Form 8-K dated November 21, 1995).
***4.5 First Amendment to Contingent Value Rights Agreement dated May 2,
1996 by and between Registrant and FUNB.
***5.1 Opinion of Cox & Smith Incorporated.
**10.1 1984 Non-Qualified Stock Option Plan, as amended and
restated. (Filed as Exhibit 10.7 to the Registrant's Annual Report on Form
10-K filed April 14, 1993).
**10.2 1984 Incentive Stock Option Plan, as amended and restated.
(Filed as Exhibit 10.8 to the Registrant's Annual Report on Form 10-K filed
April 14, 1993).
**10.3 Abraxas Petroleum Corporation 1993 Key Contributor
Stock Option Plan. (Filed as Exhibit 10.9 to the Registrant's Annual Report
on Form 10-K filed April 14, 1993).
**10.4 Conveyance of Overriding Royalty Interest dated as of April
1, 1993 by and between Abraxas Production Corporation and Morgan Guaranty
Trust Company of New York as trustee under Declaration of Trust dated
November 10, 1992, as amended, for the Commingled Pension Trust Fund
(Petroleum II). (Filed as Exhibit 10.5 to the Registrant's Current Report
on Form 8-K on April 8, 1993).
**10.5 Ancillary Agreement dated as of April 1, 1993 by and
between Abraxas Production Corporation and Morgan Guaranty Trust Company of
New York as trustee under Declaration of Trust dated November 10, 1992, as
amended, for the Commingled Pension Trust Fund (Petroleum II). (Filed as
Exhibit 10.6 to the Registrant's Current Report on Form 8-K filed on April 8,
1993).
II-3
<PAGE> 37
**10.6 Abraxas Petroleum Corporation Restricted Share Plan for
Directors. (Filed as Exhibit 10.20 to the Registrant's Annual Report on
Form 10-K filed on April 12, 1994).
**10.7 Abraxas Petroleum Corporation 1994 Long Term Incentive Plan.
(Filed as Exhibit 10.21 to the Registrant's Annual Report on Form 10-K
filed on April 12, 1994).
**10.8 Abraxas Petroleum Corporation Incentive Performance Bonus Plan.
(Filed as Exhibit 10.24 to the Registrant's Annual Report on
Form 10-K filed on April 12, 1994).
**10.9 Registration Rights and Stock Registration Agreement dated as of
August 11, 1993 by and among the Registrant, EEP and Endowment
Energy Partners II, Limited Partnership ("EEP II"). (Filed as Exhibit 10.33
to the Registrant's Registration Statement on Form S-1, Registration No.
33-66446 (the "S-1 Registration Statement")).
**10.10 First Amendment to Registration Rights and Stock
Registration Agreement dated June 30, 1994 by and among the Registrant,
EEP and EEP II. (Filed as Exhibit 10.3 to the Registrant's Current Report
on Form 8-K filed on July 14, 1994).
**10.11 Second Amendment to Registration Rights and Stock
Registration Agreement dated September 2, 1994 by and among the Registrant,
EEP and EEP II. (Filed as Exhibit 10.3 to the Registrant's Annual Report on
Form 10-K filed March 31, 1995)
**10.12 Third Amendment to Registration Rights and Stock
Registration Agreement dated November 17, 1995 by and among the Registrant,
EEP and EEP II. (Filed as Exhibit 10.17 to the Registrant's Annual Report
on Form 10-K filed March 31, 1995)
**10.13 Common Stock Purchase Warrant dated as of December 18, 1991
between the Registrant and EEP. (Filed as Exhibit 12.3 to the Registrant's
Current Report on Form 8-K filed January 9, 1992).
**10.14 Common Stock Purchase Warrant dated as of August 1, 1993 between
the Registrant and EEP. (Filed as Exhibit 10.35 to the S-1 Registration
Statement).
**10.15 Common Stock Purchase Warrant dated August 11, 1993 between
the Registrant and EEP II. (Filed as Exhibit 10.36 to the S-1
Registration Statement).
**10.16 Common Stock Purchase Warrant dated August 11, 1993 between
the Registrant and Associated Energy Managers, Inc. (Filed as Exhibit 10.37
to the S-1 Registration Statement).
II-4
<PAGE> 38
**10.17 Letter dated September 2, 1994 from the Registrant to EEP and
EEP II. (Filed as Exhibit 10.13 to the Registrant's Annual Report on Form 10-K
filed March 31, 1995)
***10.18 Amended and Restated Credit Agreement dated as of August 31,
1995 among Registrant, Abraxas Production Corporation ("Sub") and First
Union National Bank of North Carolina ("First Union").
**10.19 Warrant Agreement dated as of July 27, 1994 between the
Registrant and First Union. (Filed as Exhibit 10.3 to the Registrant's
Current Report on Form 8-K filed August 5, 1994).
**10.20 Warrant Agreement dated as of December 16, 1994, between
the Registrant and FUNB. (Filed as Exhibit 10.23 to the Registrant's Annual
Report on Form 10-K filed March 31, 1995).
***10.21 First Amendment to Warrant Agreement dated as of August 31,
1995 between the Registrant and FUNB.
**10.22 Form of Indemnity Agreement between the Registrant and each of
its directors and officers. (Filed as Exhibit 10.30 to the S-1
Registration Statement).
***10.23 Employment Agreement between the Registrant and Robert L. G.
Watson.
***10.24 Employment Agreement between the Registrant and Chris E. Williford.
***10.25 Employment Agreement between the Registrant and Robert Patterson.
***10.26 Employment Agreement between the Registrant and Stephen T. Wendel.
**10.27 Common Stock and Contingent Value Rights Purchase Agreement dated
as of November 17, 1995 by and among Registrant and the Purchasers named
in Schedule l thereto. (Filed as Exhibit 10.1 to Registrant's Current
Report on Form 8-K dated November 21, 1995.)
**10.28 Registration Agreement dated November 17, 1995 by and
among Registrant and the parties named in Schedule I thereto. (Filed as
Exhibit 10.2 to Registrant's Current Report on Form 8-K dated November 21,
1995.)
**10.29 Subscription Agreement between Registrant and Grey Wolf
Exploration, Ltd. (Filed as Exhibit 10.1 to Registrant's Current Report on
Form 8-K dated January 17, 1995.)
II-5
<PAGE> 39
**10.30 Subscription Agreement between Grey Wolf Exploration, Ltd.
and Cascade Oil and Gas Ltd. (Filed as Exhibit 10.2 to Registrant's Current
Report on Form 8-K dated January 17, 1995.)
**10.31 Portilla - 1996, L.P., Limited Partnership Agreement. (Filed
as Exhibit 10.29 to the Registrant's Annual Report on Form 10-K filed March
29, 1996)
**10.32 Purchase and Sale Agreement dated as of March 20, 1996 by
and between Acco, LLC and the Registrant. (Filed as Exhibit 10.30 to
the Registrant's Annual Report on Form 10-K filed March 29, 1996)
**10.33 Assignment and Bill of Sale dated as of March 20, 1996 by
and between Acco, LLC and Portilla - 1996, L.P. (Filed as Exhibit 10.30
to the Registrant's Annual Report on Form 10-K filed March 29, 1996)
**11.1 Statement Regarding Computation of Earnings Per Share. (Filed as
Exhibit 11 to the Registrant's Quarterly Report on Form 10-Q filed
May 15, 1996).
**18.1 Letter regarding change in accounting principle. (Filed as
Exhibit 18.1 to the Registrant's Annual Report on Form 10-K filed on April
12, 1994).
**22.1 Subsidiaries of Registrant. (Filed as Exhibit 22.1 to the
Registrant's Annual Report on Form 10-K filed March 31, 1995).
*23.1 Consent of Ernst & Young LLP.
***23.2 Consent of DeGolyer and MacNaughton.
***23.3 Consent of Cox & Smith Incorporated (included in Exhibit 5.1).
***24.1 Powers of Attorney appear on Page II - 9 of Registration
Statement filed on January 18, 1996.
***24.2 Power of Attorney of Robert D. Gershen.
***24.3 Power of Attorney of Richard M. Riggs.
**27.1 Financial Data Schedule. (Filed as Exhibit 27 to the
Registrant's Quarterly Report on Form 10-Q/A Number 1 filed June 13, 1996.)
- --------------------
* Filed herewith.
** Incorporated by reference to the filing indicated.
*** Previously filed.
II-6
<PAGE> 40
Item 17. Undertakings
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement: to
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
C. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person in the successful defense of any
action, suit or proceedings) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-7
<PAGE> 41
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Antonio, and State of Texas,
on the 13th day of June, 1996.
ABRAXAS PETROLEUM CORPORATION
By: /s/ Chris E. Williford
-----------------------------------
Chris E. Williford,
Executive Vice President, Treasurer
and Chief Financial Officer
II-8
<PAGE> 42
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert L. G. Watson and Chris E.
Williford, and each of them, as his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign
any or all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
foregoing, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Name and Title Date
--------- -------------- ----
<S> <C> <C>
*/s/ Robert L. G. Watson Chairman of the Board, _____, 1996
-----------------------------
Robert L.G. Watson President, Chief Executive Officer
(Principal Executive Officer) and Director
/s/ Chris E. Williford Executive Vice President, June 13, 1996
-----------------------------
Chris E. Williford Treasurer, Chief Financial
Officer and Director (Principal
Financial and Accounting Officer)
*/s/ Franklin Burke Director _____, 1996
-----------------------------
Franklin Burke
*/s/ Richard M. Kleberg, III Director _____, 1996
-----------------------------
Richard M. Kleberg, III
*/s/ Willard A. Marks Director _____, 1996
-----------------------------
Willard A. Marks
*/s/ James C. Phelps Director _____, 1996
-----------------------------
James C. Phelps
*/s/ Paul A. Powell, Jr. Director _____, 1996
-----------------------------
Paul A. Powell, Jr.
*/s/ Richard M. Riggs Director _____, 1996
-----------------------------
Richard M. Riggs
*/s/ Robert D. Gershen Director _____, 1996
-----------------------------
Robert D. Gershen
*By: /s/ Chris E. Williford June 13, 1996
-----------------------------
Chris E. Williford
Attorney-in-Fact
</TABLE>
II-9
<PAGE> 43
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number: Exhibit Page Number:
- --------------- ------- ------------
<S> <C> <C>
23.1 Consent of Ernst & Young LLP
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 5 to the Registration Statement (Form S-3) and related
Prospectus of Abraxas Petroleum Corporation for the registration of
3,325,000 shares of its common stock and to the incorporation by
reference therein of our report dated March 19, 1996, with respect to
the consolidated financial statements and schedules of Abraxas Petroleum
Corporation included in its Annual Report (Form 10-K) for the year ended
December 31, 1995, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
-------------------------
ERNST & YOUNG LLP
San Antonio, Texas
June 13, 1996
