SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934 (Amendment No. ________)
Filed by the Registrant [X] [ ]Confidential, for Use of
Filed by a party other than the Registrant [ ] the Commission Only
(as permitted by Rule
14a-6(e)(2))
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
ABRAXAS PETROLEUM CORPORATION
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X]No fee required.
[ ]Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ]Fee paid previously with preliminary materials.
<PAGE>
[ ]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
ABRAXAS PETROLEUM CORPORATION
April 27, 2000
Dear Stockholders:
You are cordially invited to attend the 2000 Annual Meeting of
Stockholders of Abraxas Petroleum Corporation to be held on Friday, May 26,
2000, at 9:00 a.m., at the Petroleum Club of San Antonio located at 8620 North
New Braunfels, San Antonio, Texas 78217. We hope that you will be able to attend
the meeting. Matters on which action will be taken at the meeting are explained
in detail in the Notice and Proxy Statement following this letter.
Whether or not you expect to be present and regardless of the number of
shares you own, please mark, sign and mail the enclosed proxy in the envelope
provided.
Robert L. G. Watson
Chairman of the Board, President
and Chief Executive Officer
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ABRAXAS PETROLEUM CORPORATION
500 NORTH LOOP 1604 EAST, SUITE 100
SAN ANTONIO, TEXAS 78232
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 2000
To the Stockholders of
Abraxas Petroleum Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Abraxas Petroleum Corporation ("Abraxas") will be held at the Petroleum Club of
San Antonio located at 8620 North New Braunfels, San Antonio, Texas 78217, on
Friday, May 26, 2000, at 9:00 A.M., local time, for the following purposes:
(1) To elect one director;
(2) To approve an amendment to Abraxas' Articles of Incorporation
providing that the authorized amount of common stock of Abraxas
be increased to 200,000,000 shares;
(3) To approve the appointment of auditors for the 2000 fiscal year;
and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
In accordance with the Bylaws of Abraxas and a resolution of the Board
of Directors, the record date for the meeting has been fixed at April 17, 2000.
Only stockholders of record at the close of business on that date will be
entitled to vote at the meeting or any adjournment thereof.
Stockholders who do not expect to attend the meeting in person are
urged to sign the enclosed proxy and return it promptly to Abraxas. A return
envelope is enclosed for that purpose.
By Order of the Board of Directors
Stephen T. Wendel
Secretary
Dated: April 27, 2000
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ABRAXAS PETROLEUM CORPORATION
500 North Loop 1604 East, Suite 100
San Antonio, Texas 78232
PROXY STATEMENT
-----------------------
The accompanying Proxy is solicited by the Board of Directors of
Abraxas Petroleum Corporation, a Nevada corporation ("Abraxas"), to be voted at
the 2000 Annual Meeting of Stockholders to be held on May 26, 2000, and at any
adjournments thereof, at the Petroleum Club of San Antonio located at 8620 North
New Braunfels, San Antonio, Texas 78217. This Proxy Statement and the
accompanying Proxy are being mailed to stockholders on or about April 27, 2000.
VOTING AND PROXIES
Only holders of record of common stock, par value $.01 per share
("Common Stock"), of Abraxas at the close of business on April 17, 2000, shall
be entitled to vote at the meeting. There were 22,595,016 shares of Common Stock
issued and outstanding on the record date. Stockholders are entitled to one vote
for each share of Common Stock held as of the record date. Any stockholder
giving a proxy has the power to revoke the same at any time prior to its use by
giving notice in person or in writing to the Secretary of Abraxas.
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock is necessary to constitute a quorum at
the 2000 Annual Meeting of Stockholders and any adjournment thereof. Assuming
the presence of a quorum, the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock present at the meeting, in person or by
proxy, voting together as a single class, is necessary for the approval of the
election of directors, the amendment to the Articles of Incorporation and
ratification of Abraxas' independent auditors. Under Nevada law and Abraxas'
Bylaws, abstentions and broker non-votes are tabulated in determining the number
of shares present at the meeting. Consequently, an abstention or a broker
non-vote has the same effect as a vote against a proposal or a director nominee,
as each abstention or broker non-vote would be one less vote in favor of a
proposal or for a director nominee.
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PROPOSAL ONE
ELECTION OF DIRECTORS
The Articles of Incorporation of Abraxas divide the Board of Directors
into three classes of directors serving staggered three-year terms, with one
class to be elected at each Annual Meeting. At this year's meeting, one director
is to be elected for a term of three years, to hold office until the expiration
of his term in 2003 or until a successor shall have been elected and shall have
qualified. The terms of the remaining directors will continue as indicated
below.
In December 1999, Abraxas and one of its wholly-owned subsidiaries,
Canadian Abraxas Petroleum Limited, completed an exchange offer whereby they
exchanged their 11 1/2% Senior Secured Notes due 2004, Series A, Common Stock of
Abraxas and Contingent Value Rights of Abraxas for approximately 98.43% of their
outstanding 11 1/2% Senior Secured Notes due 2004, Series D (the "Exchange
Offer"). In connection with the Exchange Offer, seven of Abraxas' directors
resigned and four new directors filled these vacancies. The following former
directors resigned their positions in December 1999: Robert W. Carington, Jr.,
Harold D. Carter, Robert D. Gershen, Richard M. Kleberg, III, Paul A. Powell,
Jr., Richard M. Riggs and Chris E. Williford. The following directors filled
four of the vacancies left by these resignations, with the other three vacancies
left unfilled: Craig S. Bartlett, Jr., Ralph F. Cox, Frederick M. Pevow, Jr. and
Joseph A. Wagda. The size of the Board was subsequently reduced from ten
directors to seven directors. In addition to the foregoing, Franklin A. Burke
resigned his position as a director with a term expiring in 2002 and filled a
vacancy with a term expiring at the 2000 Annual Meeting.
The shares represented by proxies returned duly executed will be voted,
unless otherwise specified, in favor of the nominee for the Board of Directors
named below. The nominee is now serving as a director.
Information Regarding the Nominee for Election as a Director
Franklin A. Burke, age 66, a director of Abraxas since June 1992, has
served as President and Treasurer of Venture Securities Corporation since 1971,
where he is in charge of research and portfolio management. He has also been a
general partner and director of Burke, Lawton, Brewer & Burke, a securities
brokerage firm, since 1964, where he is responsible for research and portfolio
management. Mr. Burke also serves as a director of Suburban Community Bank, a
commercial bank, JER Ventures, a retail furniture company, Omega Institute, a
job training entity, and Starkey Chemical Process Co., a chemical processing
company. Mr. Burke received a Bachelor of Science degree in Finance from Kansas
State University in 1955, a Master's degree in Finance from University of
Colorado in 1960 and studied at the graduate level at the London School of
Economics from 1962 to 1963.
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Terms Expiring in 2001
Robert L. G. Watson, age 49, has served as Chairman of the Board,
President, Chief Executive Officer and a director of Abraxas since 1977. Since
May 1996, Mr. Watson has also served as Chairman of the Board and a director of
Grey Wolf. In November 1996, Mr. Watson was elected Chairman of the Board,
President and as a director of Canadian Abraxas. Prior to joining Abraxas, Mr.
Watson was employed in various petroleum engineering positions with Tesoro
Petroleum Corporation, a crude oil and natural gas exploration and production
company, from 1972 through 1977, and DeGolyer & McNaughton, an independent
petroleum engineering firm, from 1970 to 1972. Mr. Watson received a Bachelor of
Science degree in Mechanical Engineering from Southern Methodist University in
1972 and a Master of Business Administration degree from the University of Texas
at San Antonio in 1974.
James C. Phelps, age 77, a director of Abraxas since December 1983, has
been a consultant to crude oil and natural gas exploration and production
companies such as Panhandle Producing Company and Tesoro Petroleum Corporation
since April 1981. Mr. Phelps has served as a director of Grey Wolf since January
1996. From April 1995 to May 1996, Mr. Phelps served as Chairman of the Board
and Chief Executive Officer of Grey Wolf, and from January 1996 to May 1996, he
served as President of Grey Wolf. From March 1983 to September 1984, he served
as President of Osborn Heirs Company, a privately owned crude oil exploration
and production company based in San Antonio. Mr. Phelps was President and Chief
Operating Officer of Tesoro Petroleum Corporation from 1971 to 1981 and prior to
that was Senior Vice President and Assistant to the President of Continental Oil
Company. He received a Bachelor of Science degree in Industrial Engineering and
a Master of Science degree in Industrial Engineering from Oklahoma State
University.
Terms Expiring in 2002
Craig S. Bartlett, Jr., age 66, a director of Abraxas since December
1999, has over forty years of commercial banking experience, the most recent
being with National Westminster Bank USA, rising to the position of Executive
Vice President, Senior Lending Officer and Chairman of the Credit Policy
Committee. Mr. Bartlett continues to serve on numerous boards and is active in
independent consulting roles. Mr. Bartlett is a graduate of Princeton University
with an advanced Management Degree from Pennsylvania State University.
Ralph F. Cox, age 67, a director of Abraxas since December 1999, has
over 45 years of oil and gas industry experience, over thirty of which was with
Arco. Mr. Cox retired from Arco in 1985 after having become Vice Chairman. Mr.
Cox then joined what is now Union Pacific Resources, retiring in 1989 as
President and Chief Operating Officer. Mr. Cox then joined Greenhill Petroleum
Corporation as President until leaving in 1994 to pursue his consulting
business. Mr. Cox has in the past and continues to serve on many boards
including Arco, Fidelity Investments, and the Kansas City Federal Reserve Board.
Mr. Cox earned Petroleum and Mechanical Engineering degrees from Texas A&M
University with advanced studies at Emory University.
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Frederick M. Pevow, Jr., age 36, a director of Abraxas since December
1999, has almost fifteen years of investment banking experience with firms such
as Smith Barney, Dillon Read, Salomon Smith Barney, and most recently CIBC World
Markets where he was Managing Director and headed the worldwide Investment
Banking practice covering the oilfield services and equipment industries. Mr.
Pevow currently pursues capital market transactions through Pevow & Associates,
a boutique investment and merchant banking firm. Mr. Pevow holds an
undergraduate degree from the University of Texas with further studies at Rice
University.
Joseph A. Wagda, age 56, a director of Abraxas since December 1999, has
had a varied twenty-five year career involving the financial and legal aspects
of private and corporate business transactions. Currently a practicing attorney
and president of Altamont Capital Management, Inc., Mr. Wagda's business
emphasizes special situation consulting and investing, including involvement in
distressed investments and venture capital opportunities. Previously, Mr. Wagda
was a senior managing director and cofounder of the Price Waterhouse corporate
finance practice. He also served with the finance staff of Chevron Corporation
and in the general counsel's office at Ford Motor Company. Mr. Wagda received an
undergraduate degree from Fordham College, a Masters of Business Administration,
with distinction, from the Johnson Graduate School of Management, Cornell
University, and a JD, with honors, from Rutgers University.
INFORMATION CONCERNING DIRECTORS
During the fiscal year ended December 31, 1999, the Board of Directors
held seven meetings. All directors attended each of these meetings with the
following exceptions: Messrs. Burke and Kleberg each missed two meetings and
Messers. Carter, Gershen, Powell and Riggs each missed one meeting. During 1999,
Abraxas' directors other than Messrs. Watson, Williford and Carington received
compensation for service to Abraxas as a director under Abraxas' Restricted
Share Plan For Directors (the "Director Share Plan") and under Abraxas' Director
Stock Option Plan (the "Director Option Plan"). See "Executive Compensation --
Compensation of Directors." Directors also received reimbursement of travel
expenses to attend meetings of the Board of Directors.
Neither the nominee for director nor any of the continuing directors of
Abraxas has a family relationship with any of the other executive officers or
other nominees for director. Except for Craig S. Bartlett, Jr., who is a
director of NVR, Inc., Janus Hotels & Resorts, Inc., and Allstate Financial
Corp., and Ralph F. Cox, who is a director of Waste Management, Inc., CH2M Hill
Companies and a trustee of the Fidelity Funds, neither the nominee nor any of
the continuing directors is a director of any other company which has a class of
securities registered under, or is required to file reports under, the
Securities Exchange Act of 1934 or of any company registered under the
Investment Company Act of 1940.
Abraxas believes, based solely on its review of the copies of Section
16(a) forms furnished to it and written representations from executive officers
and directors, that all Section 16(a) filing requirements have been fulfilled.
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In making this disclosure, Abraxas has relied solely on written representations
of its directors and executive officers (and its ten percent stockholders) and
copies of the reports that they have filed with the Securities and Exchange
Commission.
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COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors, which consisted of
Messrs. Kleberg, Phelps and Riggs prior to the Exchange Offer, and now consists
of Messrs. Phelps, Bartlett and Wagda, met twice during 1999. The functions of
the Audit Committee are to recommend the appointment of Abraxas' independent
auditors, to review the arrangements for and the scope of the annual audit and
to review internal accounting controls.
The Compensation Committee of the Board of Directors, which consisted
of Messrs. Kleberg, Phelps and Riggs prior to the Exchange Offer, and now
consists of Messrs. Phelps, Cox and Pevow, met once during 1999. The functions
of the Compensation Committee are to review and make recommendations concerning
the compensation of Abraxas' executive and non-executive officers. The
Compensation Committee also administers Abraxas' 1984 Incentive Stock Option
Plan, 1984 Nonqualified Stock Option Plan, 1993 Key Contributor Stock Option
Plan and 1994 Long Term Incentive Plan.
The Nominating Committee of the Board of Directors did not meet during
1999. Prior to the Exchange Offer, the Nominating Committee consisted of Messrs.
Phelps, Powell and Riggs. Since that time, the Board of Directors has not
appointed members to the Nominating Committee. The function of the Nominating
Committee is to seek out, evaluate and recommend to the Board qualified nominees
for election as directors of the Company and to consider other matters
pertaining to the size and composition of the Board. The Nominating Committee
will give appropriate consideration to qualified persons recommended by
stockholders for nomination as directors of the Company provided that such
recommendations are accompanied by information sufficient to enable the
Nominating Committee to evaluate the qualifications of the nominee.
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<PAGE>
SECURITIES HOLDINGS OF PRINCIPAL STOCKHOLDERS,
DIRECTORS, NOMINEES AND OFFICERS
Based upon information received from the persons concerned, each person
known to Abraxas to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock of Abraxas, each director and nominee for
director, each of the named executive officers and all directors and officers of
Abraxas as a group, owned beneficially as of March 31, 2000, the number and
percentage of outstanding shares of Common Stock of Abraxas indicated in the
following table:
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner Number of Shares (1) Percentage
<S> <C> <C>
Halcyon/Alan B. Slifka Management Company LLC 2,957,549 (2) 13.04%
477 Madison Avenue, 8th Floor
New York, NY 10022
Franklin Resources, Inc. 3,081,079 (3) 13.7%
777 Mariners Island Blvd., 6th Floor
San Mateo, CA 94404
Robert L. G. Watson 601,558 (4) 2.62%
Franklin A. Burke 602,584 (5) 2.67%
James C. Phelps 188,487 (6) *
Chris E. Williford 130,503 (7) *
Stephen T. Wendel 73,549 (8) *
Lee T. Billingsley 61,775 (9) *
Robert W. Carington, Jr. 118,518(10) *
Craig S. Bartlett, Jr. 4,000 (11) *
Ralph F. Cox 68,000 (11) *
Frederick M. Pevow, Jr. 0 (11) *
Joseph A. Wagda 0 (11) *
All Officers and Directors as a 1,848,974 7.97%
Group (11 persons) (4)(5)(6)(7)(8)(9)
(10)
</TABLE>
- ---------
* Less than 1%
(1) Unless otherwise indicated, all shares are held directly with sole
voting and investment power.
(2) 2,957,549 shares of common stock beneficially owned by various Halcyon
limited partnerships are managed by Halcyon/Alan B. Slifka Management
Company LLC, over which the manager disclaims beneficial ownership, as
reported on Schedule 13G filed with the SEC on January 6, 2000. An
additional 509,260 shares of common stock are owned by a Halcyon
limited partnership managed by an affiliate of Halcyon/Alan B. Slifka
Management Company LLC, over which such affiliate disclaims beneficial
ownership.
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(3) Owned by one or more open or closed-end investment companies or other
managed accounts, which are advised by direct and indirect investment
advisory subsidiaries (the "Adviser Subsidiaries") of Franklin
Resources, Inc. ("FRI"). Such advisory contracts grant to such Adviser
Subsidiaries all investment and/or voting power over the securities
owned by such advisory clients.
The voting and investment powers held by Franklin Mutual Advisers, LLC
("FMA"), formerly Franklin Mutual Advisers, Inc., an indirect wholly
owned investment advisory subsidiary of FRI, are exercised
independently from FRI and from all other investment advisor
subsidiaries of FRI (FRI, its affiliates and investment advisor
subsidiaries other than FMA are collectively referred to herein as "FRI
affiliates"). Furthermore, FMA and FRI internal policies and procedures
establish informational barriers that prevent the flow between FMA and
the FRI affiliates of information that relates to the voting and
investment powers over the securities owned by their respective
advisory clients.
Charles B. Johnson and Rupert H. Johnson, Jr. (the "Principal
Shareholders") each owns in excess of 10% of the outstanding Common
Stock of FRI and are the principal shareholders of FRI. FRI and the
Principal Shareholders may be deemed to be, for purposes of Rule 13d-3
under the Securities and Exchange Act of 1934, the beneficial owner of
securities held by persons and entities advised by FRI subsidiaries.
FRI, the Principal Shareholders and each of the Adviser Subsidiaries
disclaim any economic interest of beneficial ownership in any of the
securities covered by this statement.
FRI, the Principal Shareholders, and each of the Adviser Subsidiaries
are of the view that they are not acting as a "group" for purposes of
Section 13(d) under the 1934 Act and that they are not otherwise
required to attribute to each other the "beneficial ownership" of
securities held by any of them or by any persons or entities advised by
FRI subsidiaries.
(4) Includes 20,316 shares owned by Wind River Resources Corporation, a
corporation owned by Mr. Watson, as to which Mr. Watson has sole voting
and investment power, 30,459 shares issuable upon exercise of options
granted pursuant to Abraxas Petroleum Corporation 1993 Key Contributor
Stock Option Plan and 269,541 shares issuable upon exercise of options
granted pursuant to the Abraxas Petroleum Corporation 1994 Long Term
Incentive Plan. Does not include a total of 75,880 shares owned by the
Robert L. G. Watson, Jr. Trust and the Carey B. Watson Trust, the
trustees of which are Mr. Watson's brothers and the beneficiaries of
which are Mr. Watson's children. Mr. Watson disclaims beneficial
ownership of the shares owned by these trusts.
(5) Includes 8,900 shares issuable upon exercise of options granted
pursuant to the Abraxas Petroleum Corporation 1984 Non-Qualified Stock
Option Plan and 8,250 shares issuable upon exercise of options granted
pursuant to the Amended and Restated Director Stock Option Plan (the
"Director Option Plan").
(6) Includes 150,000 shares owned by Marie Phelps, Mr. Phelps' wife, and
9,250 shares issuable upon exercise of options granted pursuant to the
Director Option Plan.
(7) Includes 1,786 shares issuable upon exercise of options granted
pursuant to the Abraxas Petroleum Corporation 1984 Incentive Stock
Option Plan, 18,214 shares issuable upon exercise of options granted
pursuant to the Abraxas Petroleum Corporation 1993 Key Contributor
Stock Option Plan and 87,500 shares issuable upon exercise of options
granted pursuant to the Abraxas Petroleum Corporation 1994 Long Term
Incentive Plan.
(8) Includes 10,000 shares issuable upon exercise of options granted
pursuant to the Abraxas Petroleum Corporation 1993 Key Contributor
Stock Option Plan and 66,660 shares issuable upon exercise of options
granted pursuant to the Abraxas Petroleum Corporation 1994 Long Term
Incentive Plan.
(9) Includes 14,500 shares issuable upon exercise of options granted
pursuant to the Abraxas Petroleum Corporation 1994 Long Term Incentive
Plan and 1,000 shares in a retirement account.
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(10) Includes 80,000 shares issuable upon exercise of options granted
pursuant to the Abraxas Petroleum Corporation 1994 Long Term Incentive
Plan.
(11) Does not include 75,000 shares issuable upon exercise of certain
options (none of which will vest within sixty (60) days of the filing
of this proxy statement).
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee")
is composed entirely of directors who are not employees of Abraxas. The
Committee is responsible for establishing and administering the compensation
levels for Abraxas' executive and non-executive officers. The members of the
Committee believe that the ability to attract and retain qualified executive and
non-executive officers and provide appropriate incentives to Abraxas' executive
and non-executive officers is essential to the long-term success of Abraxas.
In determining executive compensation, the Committee reviews the
compensation programs, pay levels and business results of Abraxas as compared to
those crude oil and natural gas exploration and production companies included in
the KPMG Peat Marwick LLP 1998 Energy Compensation Survey (the "KPMG Survey").
Compensation Philosophy and Objectives. The philosophy underlying the
development and administration of Abraxas' annual and long-term compensation
plans is to align the interests of management with those of Abraxas'
stockholders. Key elements of this philosophy are:
*Establishing compensation plans that deliver base salaries which are
competitive with the companies included in the KPMG Survey, within
Abraxas' budgetary constraints and commensurate with Abraxas'
performance as measured by operating, financial and strategic
objectives.
*Providing equity-based incentives for executive and non-executive
officers to ensure that they are motivated over the long-term to
respond to Abraxas' business challenges and opportunities as owners
rather than just as employees.
*Rewarding executive and non-executive officers for outstanding
performance particularly where such performance is reflected by an
increase in the value of Abraxas' Common Stock.
The compensation currently paid to Abraxas' executive and non-executive
officers consists of base salary, various employee benefits (including medical
and life insurance and 401(k) plan benefits generally available to all employees
of Abraxas), annual cash bonuses and grants of stock options and awards under
Abraxas' 1994 Long Term Incentive Plan (the "LTIP").
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Elements of the Executive Compensation Program.
Base Salaries. The Committee believes that Abraxas' base salary levels
for executive officers are consistent with the practices of the companies
included in the KPMG Survey. Increases in base salary levels from time to time
are designed to reflect competitive practices in the industry, Abraxas'
financial performance and individual performance of the officer.
In the first quarter of each year, the Chief Executive Officer submits
to the Committee recommendations for salary adjustments based upon his
subjective evaluation of individual performance and his subjective judgment
regarding setting each executive and non-executive officer's salary within
Abraxas' salary range. This range is set by reference to the salaries paid by
the companies included in the KPMG Survey while remaining within Abraxas'
budgetary constraints. The companies included in the KPMG Survey are used to
compare Abraxas' salary structure to that of other companies that compete with
Abraxas for executives but without targeting salaries to be higher, lower or
approximately the same as those of the companies included in the KPMG Survey.
The Committee does not consider the performance of any of the companies included
in the KPMG Survey in setting Abraxas' salary structure.
Annual Cash Bonuses. In 1994, the Board of Directors adopted an annual
cash bonus plan, which established certain criteria for the payment of annual
cash bonuses to all officers of Abraxas at or above the Vice President level.
The plan was amended in 1997. Under the plan as amended, each participant is
given an annual bonus opportunity based on the achievement of certain goals. For
Messrs. Watson, Williford and Carington, the base bonus could be as high as 35%
of base salary if all goals are attained. For Mr. Wendel and Dr. Billingsley,
the bonus could be as high as 25% of base salary if all goals are attained. The
amount of the bonuses to be paid to Messrs. Watson, Williford, Carington and
Wendel and Dr. Billingsley, if any, will be based upon attaining goals set by
the Board of Directors after assessing the recommendations of management for
earnings per share, cash flow per share, share price and general and
administrative expenses per barrel of oil equivalent produced ("G & A"), with
each factor being weighted equally in the calculation. With respect to officers
responsible for Abraxas' operations, earnings per share, cash flow per share,
share price and G & A will account for 50% of the calculation and performance
factors unique to Abraxas' operations will account for the remaining 50% of the
calculation. With respect to officers responsible for Abraxas' exploration and
geological activities, including Dr. Billingsley, all of the goals described
above are included and account for 50% of the calculation and a goal for
incremental proved (booked) reserves from certain properties accounts for the
remaining 50%. If all performance goals are met or exceeded, additional bonuses
of up to 25% of base salary can be earned by each participant. The Board has the
prerogative to adjust the bonus earned by any participant, including Messrs.
Watson, Williford, Carington and Wendel and Dr. Billingsley, to take into
account extraordinary factors not contemplated by the bonus plan when the impact
of such contributions or factors cannot be adequately reflected by the bonus
determined under the methodology described above. In 1999, the goals for cash
flow per share and G & A per barrel of oil equivalent produced were met as
related to Messers. Watson, Williford, Carington and Wendel resulting in bonuses
of $43,750, $26,250, $35,000 and $13,750, respectively, and the goals for cash
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flow per share, G & A per barrel of oil equivalent produced and incremental
proved (booked) reserves were met relating to Dr. Billingsley resulting in a
bonus of $22,500.
Long-Term Incentives. In 1994, the Board adopted the LTIP in order to
compensate executive and non-executive officers and employees who contribute
significantly to the operation of Abraxas. In 1998, the Board amended the LTIP
in order to increase the number of shares of Common Stock which may be issued
thereunder to an aggregate of 1,550,000 shares. The LTIP makes available to the
Committee a number of incentive devices such as incentive stock options and
non-qualified stock options, stock appreciation rights, restricted stock,
performance units, performance shares and dividend units. The Committee adopts
administrative guidelines from time to time, which define specific eligibility
criteria, the types of awards to be employed and the value of such awards.
Specific terms of each award, including minimum performance criteria, which must
be met to receive payment, are provided in individual award agreements granted
to each award recipient. Award agreements also contain change in control
provisions. Option holdings and previous awards are not taken into account.
The Board believes that the LTIP has given Abraxas the flexibility to
structure awards to meet Abraxas' business needs. In making long-term incentive
awards under the LTIP, the Committee seeks to ensure that the total compensation
package, including cash compensation, is competitive with the compensation paid
by the companies included in the KPMG Survey, yet substantially contingent upon
the success of individual and corporate efforts to produce attractive long-term
returns to Abraxas stockholders.
CEO Compensation. Mr. Watson's salary in 1999 was based on the
Committee's evaluation of his performance and Abraxas' performance, after
reviewing competitive salary data from the companies included in the KPMG Survey
and Abraxas' budgetary constraints. The Committee's determination of Mr.
Watson's total salary was based upon the salaries paid to chief executive
officers of the companies included in the KPMG Survey and the salary structure
of Abraxas.
Policy on Deductibility of Compensation. In 1993, the federal tax laws
were amended to limit the deduction a publicly-held company is allowed for
compensation paid to the chief executive officer and to the four most highly
compensated executive officers other than the chief executive officer.
Generally, amounts paid in excess of $1 million to a covered executive, other
than performance-based compensation, cannot be deducted. In order to constitute
performance-based compensation for purposes of the tax law, the performance
measures must be approved by the stockholders. Since Abraxas does not anticipate
that the compensation for any executive officer will exceed the $1 million
threshold in the near term, stockholder approval necessary to maintain the tax
deductibility of compensation at or above that level is not being requested. The
Committee will reconsider this matter if compensation levels approach this
threshold, in light of the tax laws then in effect. The Committee will consider
ways to maximize the deductibility of executive compensation, while retaining
the discretion the Committee deems necessary to compensate executive officers in
a manner commensurate with performance and the competitive environment for
executive talent.
15
<PAGE>
This report is submitted by the members of the Committee:
James C. Phelps
Ralph F. Cox
Frederick M. Pevow, Jr.
Compensation Summary
The following table sets forth a summary of compensation for the fiscal
years ended December 31, 1997, 1998 and 1999 paid by Abraxas to Robert L.G.
Watson, Abraxas' Chairman of the Board, President and Chief Executive Officer,
Chris E. Williford, Abraxas' Executive Vice President, Chief Financial Officer
and Treasurer, and Stephen T. Wendel, Abraxas' Vice President-Land and
Marketing, and to Robert W. Carington, Jr., Abraxas' Executive Vice President
and to Lee T. Billingsley, Abraxas' Vice President-Exploration for the fiscal
years ended December 31, 1998 and 1999. Abraxas did not have any executive
officers other than Messrs. Watson, Williford, and Wendel whose total annual
salary and bonus exceeded $100,000 for the year ended December 31, 1997, Messrs.
Watson, Williford, Carington and Wendel for the year ended December 31, 1998,
and Messrs. Watson, Williford, Carington and Wendel and Dr. Billingsley for the
year ended December 31, 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
------------------
Annual Compensation Awards
------------------------------------------------- ------------------
Options
Name and Principal /SARs
Position Year Salary ($) Bonus ($) (#)
------------------------------ -------- -------------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Robert L. G. Watson, 1997 $211,154 $39,373 (1) 100,000
Chairman of the Board and 1998 $253,367 -- 140,000
President 1999 $259,615 $43,750 0
Chris E. Williford, 1997 $148,269 $26,250 (1) 40,000
Executive Vice President, 1998 $155,770 -- 35,000
Chief Financial Officer 1999 $155,769 $26,250 0
and Treasurer
Robert W. Carington, Jr., 1998 $103,846 -- 320,000
Executive Vice President 1999 $207,629 $35,000 0
Lee T. Billingsley 1998 $ 31,154 -- 0
Vice President - Exploration 1999 $124,615 $22,500 30,000
Stephen T. Wendel, 1997 $106,731 $13,750 (1) 25,000
Vice President - Land and 1998 $114,231 -- 20,000
Marketing 1999 $114,231 $13,750 15,000
------------------------------ -------- -------------------- ------------------- ------------------
</TABLE>
(1) One-half paid in cash and one-half in stock awards.
16
<PAGE>
Grants of Stock Options and Stock Appreciation Rights During the Fiscal Year
Ended December 31, 1999
Pursuant to the Abraxas Petroleum Corporation 1984 Incentive Stock
Option Plan (the "ISO Plan"), the Abraxas Petroleum Corporation 1993 Key
Contributor Stock Option Plan (the "1993 Plan") and the Abraxas Petroleum
Corporation 1994 Long Term Incentive Plan (the "LTIP"), Abraxas grants to its
employees and officers (including its directors who are also employees)
incentive stock options and non-qualified stock options. The ISO Plan, the 1993
Plan and the LTIP are administered by the Compensation Committee which, based
upon the recommendation of the Chief Executive Officer, determines the number of
shares subject to each option.
The Compensation Committee did not grant any stock options to Messrs.
Watson, Williford or Carington during 1999. The table below contains certain
information concerning stock options granted to Dr. Billingsley and Mr. Wendel
during 1999:
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR
--------------------------------------------------------------------------------------------------------------
% of Total Potential Realizable Value
Options Exercise Price at Assumed Annual Rates of
Options Granted to Per Share Stock Price Appreciation
Name Granted Employees (Price at Expiration Date for Option Term
Grant)
=============== ============ ============== ================ ================= ============= ==============
5% 10%
<S> <C> <C> <C> <C> <C> <C>
Lee T. 30,000(1) 20.69 $1.41 11/18/09 $26,700 $67,500
Billingsley
Stephen T. 15,000(1) 16.34 $1.41 11/18/09 $13,350 $33,750
Wendel
- --------------
</TABLE>
(1) One-fourth of the options becomes exercisable on each of the first four
anniversaries of the date of grant.
17
<PAGE>
The table below contains certain information concerning exercises of
stock options during the fiscal year ended December 31, 1999, by Messrs. Watson,
Williford, Carington, Wendel and Dr. Billingsley and the fiscal year end value
of unexercised options held by Messrs. Watson, Williford, Carington, Wendel and
Dr. Billingsley.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Fiscal 1999
and Fiscal Year End Option Values
Value of
Number of Unexercised
Unexercised Options in-the-Money
on December 31,1999 Options on
(#) December 31,
Exercisable/ 1999 ($)
Shares Acquired By Unexercisable Exercisable/
Name Exercise (#) Value Realized ($) Unexercisable
---- ------------ -------------- --------------------- --------------
<S> <C> <C> <C> <C>
Robert L. G. Watson 0 0 275,000/165,000 0/0
Chris E. Williford 0 0 102,500/52,500 0/0
Robert W. Carington, Jr. 0 0 80,000/240,000 0/0
Lee T. Billingsley 0 0 63,995/44,665 0/0
Stephen T. Wendel 0 0 14,500/73,500 0/0
</TABLE>
Long Term Incentive Plan Awards During the Fiscal Year Ended December 31, 1999
Abraxas did not make any awards to any of Messrs. Watson, Williford,
Carington and Wendel under a long-term incentive plan during the fiscal year
ended December 31, 1999.
Employment Agreements
Abraxas has entered into employment agreements with each of Messrs.
Watson, Williford, Carington and Wendel as well as with Dr. Lee T. Billingsley,
Abraxas' Vice President of Exploration, pursuant to which each of Messrs.
Watson, Williford, Carington, Wendel and Dr. Billingsley will receive
compensation as determined from time to time by the Board in its sole
discretion.
The employment agreements for Messrs. Watson, Williford and Carington
are scheduled to terminate on December 21, 2002, and shall be automatically
extended for additional one-year terms unless Abraxas gives Messrs. Watson,
Williford and Carington 120 days notice prior of the expiration of the original
term or any extension thereof of its intention not to renew the employment
agreement. If, during the term of Messrs. Watson's, Williford's or Carington's
employment agreements, Messrs. Watson's, Williford's or Carington's employment
is terminated other than for cause or disability, by reason of Messrs. Watson's,
Williford's or Carington's death or retirement or by Messrs. Watson, Williford
18
<PAGE>
or Carington, as the case may be, other than for good reason, then Messrs.
Watson, Williford or Carington, as the case may be, will be entitled to receive
a lump sum payment equal to the greater of (a) his annual base salary for the
last full year during which he was employed by Abraxas or (b) his annual base
salary for the remainder of the term of each of their respective employment
agreements.
If a change of control occurs during the term of Messrs. Watson's,
Williford's or Carington's employment agreements, and if subsequent to such
change of control, Messrs. Watson's, Williford's, or Carington's employment is
terminated other than for cause or disability, by reason of Messrs. Watson's,
Williford's or Carington's death or retirement or by Messrs. Watson, Williford
or Carington, as the case may be, other than for good reason, then Mr. Watson
will be entitled to the following:
(1)if such termination occurs prior to the end of the first year of the
initial term of his employment agreement, a lump sum payment equal to five (5)
times his annual base salary;
(2)if such termination occurs after the end of the first year of the
initial term of his employment agreement but prior to the end of the second year
of the initial term of his employment agreement, a lump sum payment equal to
four (4) times his annual base salary;
(3)if such termination occurs after the end of the second year of the
initial term of his employment agreement but prior to the end of the third year
of the initial term of his employment agreement, a lump sum payment equal to
three (3) times his annual base salary; and
(4)if such termination occurs after the end of the third year of the
initial term of his employment agreement a lump sum payment equal to 2.99 times
his annual base salary.
Under such circumstances, Messrs. Williford and Carington will be
entitled to the following:
(1)if such termination occurs prior to the end of the first year of the
initial term of his respective employment agreement, a lump sum payment equal to
four (4) times his annual base salary;
(2)if such termination occurs after the end of the first year of the
initial term of his respective employment agreement but prior to the end of the
second year of the initial term of his respective employment agreement, a lump
sum payment equal to three (3) times his annual base salary; and
(3)if such termination occurs after the end of the second year of the
initial term of his respective employment agreement, a lump sum payment equal to
2.99 times his annual base salary.
The employment agreements for Mr. Wendel and Dr. Billingsley,
originally scheduled to terminate on December 31, 1998, have been automatically
19
<PAGE>
extended for two years and will terminate on December 31, 2000, and may be
automatically extended for an additional year if by December 1 of the prior year
neither Abraxas nor Mr. Wendel or Dr. Billingsley, as the case may be, has given
notice that he or it, as the case may be, does not wish to extend the term.
Except in the event of a change in control, at all times during the term of the
employment agreements, each of Mr. Wendel's and Dr. Billingsley's employment is
at will and may be terminated by us for any reason without notice or cause. If a
change in control occurs during the term of the employment agreement or any
extension thereof, the expiration date of Mr. Wendel's and Dr. Billingsley's
employment agreement is automatically extended to a date no earlier than three
years following the effective date of such change in control. If, following a
change in control, Mr. Wendel's or Dr. Billingsley's employment is terminated
other than for cause or disability by reason of Mr. Wendel's or Dr.
Billingsley's death or retirement or by Mr. Wendel or Dr. Billingsley, as the
case may be, other than for good reason, then Mr. Wendel and Dr. Billingsley
will each be entitled to receive a lump sum payment equal to three times his
annual base salary.
If any lump sum payment to Messrs. Watson, Williford, Carington, Wendel
or Dr. Billingsley would individually or together with any other amounts paid or
payable constitute an "excess parachute payment" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended, and applicable
regulations thereunder, the amounts to be paid will be increased so that Messrs.
Watson, Williford, Carington, Wendel or Dr. Billingsley, as the case may be,
will be entitled to receive the amount of compensation provided in his contract
after payment of the tax imposed by Section 280G.
Report on Repricing of Options
On March 25, 1999, the Board of Directors approved a plan pursuant to
which the price of each outstanding stock option granted to employees and
directors of Abraxas with an exercise price greater than $2.06 per share was
reduced to $2.06 per share. However, all options repriced for Messrs. Watson,
Williford, and Carington are not exercisable until Abraxas' common stock closes
daily trading at a price greater than or equal to $4.12 per share for 10 days
out of any 30 day trading period.
On March 25, 1998, the Board of Directors approved a plan pursuant to
which the price of each outstanding stock option granted to employees and
directors of Abraxas with an exercise price greater than $7.44 per share was
reduced to $7.44 per share.
On March 7, 1996, the Committee approved a plan pursuant to which the
exercise price of each outstanding stock option granted to employees of Abraxas
prior to January 1, 1996, including options granted to Messrs. Watson, Williford
and Wendel, were reduced to $6.75 per share.
The Committee believed that repricing the existing options was in the
best interests of Abraxas and its stockholders. In the view of the Committee,
the decline of the market price of the Abraxas Common Stock substantially
impaired the effectiveness of the existing options as a means of attracting and
retaining qualified executive and non-executive officers and providing
appropriate incentives to the Abraxas executive and non-executive officers. In
20
<PAGE>
addition, the Committee believed that a significant portion of the decline in
the market price was the result of market factors that affected the stocks of
the companies included in the KPMG Survey.
The following table sets forth certain information concerning repricing
of stock options held by any current executive officer during the period
commencing on May 7, 1991 (the date on which Abraxas became a reporting company
pursuant to the Securities Exchange Act of 1934, as amended), and ending on
December 31, 1999.
<TABLE>
<CAPTION>
Length of
Original
Market Price Option Term
of Stock at Exercise Remaining
Number of Securities Time of Price at at Date of
Date of Underlying Options Repricing or Time of Repricing
Repriced or Amended Repricing or New or
Name Repricing Old New Amendment Amendment Price Amendment
- ---- --------- --- --- --------- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert L. G. 03/07/96 60,000 60,000 $6.75 $9.50 $6.75 95 Mos
Watson, 03/25/98 100,000 100,000 $7.44 $7.50 $7.44 104 Mos
Chairman of the 03/25/98 100,000 100,000 $7.44 $10.75 $7.44 108 Mos
Board, 03/25/98 100,000 100,000 $7.44 $14.38 $7.44 116 Mos
President and 03/25/99 60,000 60,000 $2.06(1) $6.75 $2.06 71 Mos
Chief Executive 03/25/99 40,000 40,000 $2.06(1) $5.00 $2.06 84 Mos
Officer 03/25/99 100,000 100,000 $2.06(1) $7.44 $2.06 92 Mos
03/25/99 100,000 100,000 $2.06(1) $7.44 $2.06 96 Mos
03/25/99 100,000 100,000 $2.06(1) $7.44 $2.06 105 Mos
03/25/99 40,000 40,000 $2.06(1) $5.56 $2.06 116 Mos
Chris E. 03/07/96 6,252 6,252 $6.75 $7.50 $6.75 75 Mos
Williford, 03/07/96 13,748 13,748 $6.75 $9.75 $6.75 76 Mos
Executive Vice 03/07/96 20,000 20,000 $6.75 $9.50 $6.75 95 Mos
President, 03/25/98 20,000 20,000 $7.44 $7.50 $7.44 104 Mos
Chief Financial 03/25/98 40,000 40,000 $7.44 $10.75 $7.44 108 Mos
Officer and 03/25/98 15,000 45,000 $7.44 $14.38 $7.44 116 Mos
Treasurer 03/25/99 20,000 20,000 $2.06(1) $6.75 $2.06 51 Mos
03/25/99 20,000 20,000 $2.06(1) $6.75 $2.06 71 Mos
03/25/99 20,000 20,000 $2.06(1) $5.00 $2.06 84 Mos
03/25/99 20,000 20,000 $2.06(1) $7.44 $2.06 92 Mos
03/25/99 40,000 40,000 $2.06(1) $7.44 $2.06 96 Mos
03/25/99 15,000 15,000 $2.06(1) $7.44 $2.06 105 Mos
03/25/99 20,000 20,000 $2.06(1) $5.56 $2.06 116 Mos
Stephen T. 03/07/96 10,000 10,000 $6.75 $9.75 $6.75 76 Mos
Wendel, 03/07/96 20,000 20,000 $6.75 $9.50 $6.75 95 Mos
Vice President 03/25/98 8,000 8,000 $7.44 $7.50 $7.44 104 Mos
- - Land and 03/25/98 25,000 25,000 $7.44 $10.75 $7.44 108 Mos
Marketing 03/25/98 10,000 10,000 $7.44 $14.38 $7.44 116 Mos
03/25/99 1,340 1,340 $2.06 $6.75 $2.06 3 Mos
03/25/99 10,000 10,000 $2.06 $6.75 $2.06 51 Mos
03/25/99 20,000 20,000 $2.06 $6.75 $2.06 71 Mos
03/25/99 10,660 10,660 $2.06 $5.00 $2.06 84 Mos
03/25/99 8,000 8,000 $2.06 $7.44 $2.06 82 Mos
03/25/99 25,000 25,000 $2.06 $7.44 $2.06 96 Mos
03/25/99 10,000 10,000 $2.06 $7.44 $2.06 105 Mos
03/25/99 10,000 10,000 $2.06 $5.56 $2.06 115 Mos
21
<PAGE>
Robert W. 03/25/99 300,000 300,000 $2.06(1) $8.75 $2.06 110 Mos
Carington, Jr., 03/25/99 20,000 20,000 $2.06(1) $5.56 $2.06 114 Mos
Executive Vice
President
Lee T. 03/25/99 50,000 50,000 $2.06 $8.75 $2.06 115 Mos
Billingsley, 03/25/99 8,000 8,000 $2.06 $5.56 $2.06 116 Mos
Vice President
- - Exploration
</TABLE>
- --------
(1) Not exercisable until the Abraxas Common Stock closes daily trading at a
price greater than or equal to $4.12 per share for 10 days out of any
30-day trading period.
This report is submitted by the members of the Committee:
James C. Phelps
Ralph F. Cox
Frederick M. Pevow, Jr.
Performance Graph
Set forth below is a performance graph comparing yearly cumulative
total stockholder return on the Abraxas' Common Stock with (a) the monthly index
of stocks included in the Standard and Poor's 500 Index and (b) the CIBC World
Markets Index (the "CIBC Index") of stocks of crude oil and natural gas
exploration and production companies with a market capitalization of less than
$300 million (the "Comparable Companies"). The Comparable Companies are: Adams
Resources & Energy, Inc.; Basin Exploration, Inc.; Bellwether Exploration
Company; Callon Petroleum Company; Columbus Energy Corporation; Goodrich
Petroleum Corporation; Howell Corporation; Key Production Company, Inc.; Magnum
Hunter Resources, Inc.; Maynard Oil Company; The Meridian Resource Corporation;
PetroCorp Incorporated; Plains Resources, Inc.; Prima Energy Corporation; Unit
Corporation; Venus Exploration, Inc.; and Wiser Oil Company. Prior to this year,
Abraxas had selected the Everen Securities monthly index of stocks of crude oil
and natural gas exploration and production companies with a market
capitalization of less than $300 million (the "Everen Index") for industry peer
comparison purposes. However, Everen Securities was acquired in 1999 and its
successor, First Union Corporation, no longer publishes the Everen Index.
Accordingly, Abraxas selected the CIBC Index for industry peer comparison
purposes.
22
<PAGE>
All of these cumulative total returns are computed assuming the value
of the investment in Abraxas' Common Stock and each index as $100.00 on December
31, 1994, and the reinvestment of dividends at the frequency with which
dividends were paid during the applicable years. The years compared are 1995,
1996, 1997, 1998 and 1999.
Abraxas S&P CIBC
500 Index
--------- ------- -------
December 31, 1994 100% 100% 100%
March 31, 1995 96% 109% 99%
June 30, 1995 95% 119% 105%
September 30, 1995 87% 127% 107%
December 31, 1995 68% 134% 108%
March 31, 1996 58% 141% 110%
June 30, 1996 70% 146% 128%
September 30, 1996 62% 150% 138%
December 31, 1996 107% 161% 174%
March 31, 1997 119% 165% 171%
June 30, 1997 139% 193% 189%
September 30, 1997 157% 206% 201%
December 31, 1997 159% 211% 166%
March 31, 1998 85% 240% 169%
June 30, 1998 99% 247% 157%
September 30, 1998 74% 221% 120%
December 31, 1998 47% 268% 89%
March 31, 1999 19% 280% 95%
June 30, 1999 13% 299% 126%
September 30, 1999 23% 279% 136%
December 31, 1999 10% 320% 118%
Compensation of Directors
Non-Qualified Stock Option Plan. Each former director of Abraxas, other
than Messrs. Watson, Williford, Carington, Carter and Gershen, and current
directors Burke and Phelps have previously been granted options to purchase
8,900 shares of Common Stock under Abraxas' 1984 Non-Qualified Stock Option Plan
(the "Non-Qualified Plan"). There are currently outstanding options to purchase
8,900 shares of Common Stock under the Non-Qualified Plan. Mr. Burke holds an
option to purchase 8,900 shares of Common Stock at an exercise price of $2.06
per share.
Restricted Share Plan for Directors. Pursuant to the Abraxas Petroleum
Corporation Restricted Share Plan for Directors (the "Director Share Plan"),
each director of Abraxas, other than Mr. Watson, is entitled to receive
compensation for attendance at regular and special meetings of the Board of
Directors. Initially each eligible director of Abraxas was issued 400 shares of
Common Stock during 1994 as an initial grant under the Director Share Plan and
thereafter received a number of shares of Common Stock equal to the product of
1,000 times the Capitalization Factor (as defined in the Director Share Plan)
23
<PAGE>
divided by the Average Stock Price (as defined in the Director Share Plan) as of
the date of a meeting of the Board. In 1997, the Director Share Plan was amended
to provide that one-half of the compensation under the Director Share Plan shall
be paid in cash and one-half in shares of Abraxas Common Stock. For 1999, each
of the following directors received the number of shares of Common Stock and
cash compensation set forth opposite his name under the Director Share Plan:
Name Number of Shares Cash Compensation
- ---------- -------------------- -----------------------
Franklin M. Burke 1,519 $2,500
Harold D. Carter (1) 1,619 $3,000
Robert D. Gershen (1) 1,619 $3,000
Richard M. Kleberg (1) 1,806 $3,250
James C. Phelps 2,526 $4,250
Paul A. Powell (1) 1,619 $3,000
Richard M. Riggs (1) 2,045 $3,750
Craig S. Bartlett, Jr. -- --
Ralph F. Cox -- --
Frederick M. Pevow, Jr. -- --
Joseph A. Wagda -- --
- -----------
(1) Resigned as a director on December 21, 1999.
Director Stock Option Plan. Pursuant to the Abraxas Petroleum
Corporation Director Stock Option Plan (the "Director Option Plan"), each
non-employee member of the Abraxas Board of Directors on June 1, 1996, was
granted an option to purchase 8,000 shares of Common Stock at a price of $6.75
per share, which exercise price was reduced to $2.06 on March 25, 1999. Each
person who becomes a director after that date will also be granted an option to
purchase 8,000 shares of Common Stock at the then prevailing price of the Common
Stock as quoted on the OTC Bulletin Board. In addition, in March 1998, the
Director Option Plan was amended and restated to provide that each non-employee
member of the Board of Directors as of the date of the first meeting of the
Board of Directors in each year will receive options to purchase 2,000 shares of
Common Stock at the closing price of the Common Stock on such date. On each of
March 25, 1998, and March 25, 1999, each non-employee Director received options
to purchase 2,000 shares of Common Stock.
Other Compensation. Except for the following, the directors of Abraxas
received no other compensation for services as directors, except for
reimbursement of travel expenses to attend Board meetings.
On November 18, 1999, Abraxas granted 15,000 options at an exercise
price of $1.41 per share to each of Messrs. Burke, Carter, Phelps, Powell and
Riggs.
On December 22, 1999, Abraxas granted 75,000 options at an exercise
price of $.97 per share to each of Messrs. Bartlett, Cox, Pevow and Wagda.
24
<PAGE>
CERTAIN TRANSACTIONS
Wind River Resources Corporation ("Wind River"), all of the capital
stock of which is owned by Mr. Watson, owns a twin-engine airplane. The airplane
is available for business use by employees of Abraxas from time to time at Wind
River's cost. Abraxas paid Wind River a total of $336,482 for use of the plane
during 1999.
Grey Wolf owns a 10% interest in certain producing properties owned by
Canadian Abraxas Petroleum Limited's wholly-owned subsidiary ("Canadian
Abraxas"), and in Canadian Abraxas' natural gas processing plants and manages
the operations of Canadian Abraxas pursuant to a management agreement between
Canadian Abraxas and Grey Wolf. Under the management agreement, Canadian Abraxas
reimburses Grey Wolf for reasonable costs or expenses attributable to Canadian
Abraxas and for administrative expenses based upon the percentage that Canadian
Abraxas' gross revenue bears to the total gross revenue of Canadian Abraxas and
Grey Wolf. In 1999, Canadian Abraxas paid CDN $2,267,770 to Grey Wolf pursuant
to the management agreement.
Abraxas has adopted a policy that transactions, including loans,
between Abraxas and its officers, directors, principal stockholders, or
affiliates of any of them, will be on terms no less favorable to Abraxas than
can be obtained on an arm's length basis in transactions with third parties and
must be approved by the vote of at least a majority of the disinterested
directors.
25
<PAGE>
PROPOSAL TWO
APPROVAL OF AMENDMENT TO ABRAXAS
PETROLEUM CORPORATION'S ARTICLES OF INCORPORATION
The Abraxas Board of Directors has unanimously approved an amendment to
Article Fourth of the Articles of Incorporation of Abraxas (the "Articles")
which would increase the number of authorized shares of Common Stock that
Abraxas is authorized to issue. The proposed amendment (the "Authorized Stock
Amendment") is set forth in its entirety in Exhibit "A" to this Proxy Statement.
The Articles currently authorize the issuance of 50,000,000 shares of
Common Stock of which 22,595,016 shares were issued and outstanding or reserved
for issuance as of May 1, 2000. The Authorized Stock Amendment would authorize
the issuance of 200,000,000 shares of Common Stock.
If approved, the increased number of authorized shares of Common Stock
would be available for issuance from time to time for such purposes and
consideration as the Board may approve and no further vote of stockholders of
Abraxas will be required, except as provided by the Articles, under Nevada law
or the rules of any national securities exchange on which shares of Abraxas
Common Stock are at the time listed or quoted.
As part of the Exchange Offer, which was consummated on December 21,
1999, Abraxas issued Contingent Value Rights (the "CVRs"). The terms of the CVRs
issued in the exchange offer provided that the holders thereof could be entitled
to receive up to a total of 104,621,164 shares of Common Stock. Subsequent to
the issuance of the CVRs, the Common Stock traded at a price per share of $2.01
or higher for 30 days during the 45-day trading period beginning on February 28,
2000, and ending on April 10, 2000. As a result, under the terms of the CVRs,
the maximum number of shares which holders of the CVRs could be entitled to
receive has been reduced to 26,400,000 shares of Common Stock. In addition, in
the event the Common Stock trades at a price per share higher than $2.01 for 30
days during any future 45-day trading period, the number of shares of Common
Stock issuable pursuant to the CVRs would decrease correspondingly to a number
below 26,400,000. On December 21, 2000, or at the election of Abraxas, on May
21, 2001, Abraxas may be required to issue additional shares of common stock to
the holders of the CVRs. The actual number of shares issued will depend on the
market price of the Common Stock. The CVRs will terminate and no Common Stock
will be issuable pursuant thereto if the market price of the Common Stock
exceeds certain target prices for a period of 30 trading days during any 45
consecutive trading day period prior to the expiration date. The target price on
any given date will equal $5.03 plus daily interest from December 21, 1999, at
an annual rate of 11.5%. On December 21, 2000, the target price will be $5.68
and on May 21, 2001, the target price will be $5.97. Although Abraxas is unable
to determine whether, or how many, shares of Common Stock will be issuable
pursuant to the CVRs, the Board considers it advisable that Abraxas be in a
position to issue such additional shares in such circumstances without calling a
special meeting of stockholders.
26
<PAGE>
In addition, Abraxas may from time to time wish to issue shares of
Common Stock to afford the Board greater flexibility in meeting possible future
financing requirements, to effect future transactions such as acquisitions,
stock splits or stock dividends and to meet other corporate needs as they arise.
Although Abraxas has no present plans to issue any additional shares of Common
Stock for such purposes, the Board considers it advisable that Abraxas be in a
position to issue such additional shares in such circumstances without calling a
special meeting of stockholders.
The authorization of additional shares of Common Stock will not, by
itself, have any effect on the rights of holders of the currently outstanding
shares of Common Stock. However, any issuance of additional shares of Common
Stock could, depending on the circumstances, affect the existing holders of
shares of Common Stock by diluting per share earnings and voting power of the
outstanding Common Stock. The availability for issuance of additional shares of
Common Stock could also discourage or make more difficult efforts to obtain
control of Abraxas.
The additional shares of Common Stock for which authorization is sought
would be identical to the shares of Common Stock now authorized. Holders of
Common Stock do not have preemptive rights to subscribe to additional
securities, which may be issued by Abraxas.
Under the terms of the agreement governing the CVRs, in the event that
the Authorized Stock Amendment is not approved, we will be required to effect a
reverse stock split. The agreement governing the CVRs does not contemplate any
alternative in lieu of issuing additional shares of Common Stock for satisfying
the requirements of the CVRs.
Under the Nevada General Corporation Law (the "Nevada GCL"), the
affirmative vote of the holders of a majority of the outstanding shares of
Abraxas Common Stock entitled to notice of and to vote at the Annual Meeting
voting together as a single class is required to adopt the Authorized Stock
Amendment.
The Board recommends that stockholders vote FOR the Authorized Stock
Amendment.
27
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PROPOSAL THREE
APPOINTMENT OF AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP
("Ernst & Young") to examine the financial statements of Abraxas for the 2000
fiscal year. Representatives of Ernst & Young are expected to be present at the
Annual Meeting of Stockholders with the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
Approval of the appointment of auditors is not a matter, which is
required to be submitted to a vote of stockholders, but the Board of Directors
considers it appropriate for the stockholders to express or withhold their
approval of the appointment. If stockholder approval should be withheld, the
Board of Directors would consider an alternative appointment for the succeeding
fiscal year. The Board of Directors recommends that the stockholders approve the
appointment of Ernst & Young.
28
<PAGE>
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2001 Annual
Meeting must be received in writing by Abraxas at its principal executive
offices not later than December 31, 2000. Abraxas' principal executive offices
are located at 500 North Loop 1604 East, Suite 100, San Antonio, Texas 78232.
PROXY SOLICITATION
The cost of soliciting proxies will be borne by Abraxas. Proxies may be
solicited through the mail and through telephonic or telegraphic communications
to, or meetings with, stockholders or their representatives by directors,
officers and other employees of Abraxas who will receive no additional
compensation therefor.
Abraxas requests persons such as brokers, nominees and fiduciaries
holding stock in their names for others, or holding stock for others who have
the right to give voting instructions, to forward proxy materials to their
principals and to request authority for the execution of the proxy, and Abraxas
will reimburse such persons for their reasonable expenses.
OTHER MATTERS
No business other than the matters set forth in this Proxy Statement is
expected to come before the meeting, but should any other matters requiring a
vote of stockholders arise, including a question of adjourning the meeting, the
persons named in the accompanying Proxy will vote thereon according to their
best judgment in the interests of Abraxas. If any of the nominees for office of
director should withdraw or otherwise become unavailable for reasons not
presently known, the persons named as proxies may vote for another person in his
place in what they consider the best interests of Abraxas.
Upon the written request of any person whose proxy is solicited
hereunder, Abraxas will furnish without charge to such person a copy of its
annual report filed with the Securities and Exchange Commission on Form 10-K,
including financial statements and schedules thereto, for the fiscal year ended
December 31, 1999. Such written request is to be directed to the attention of
Stephen T. Wendel, 500 North Loop 1604 East, Suite 100, San Antonio, Texas
78232.
By Order of the Board of Directors
Stephen T. Wendel
Secretary
Dated: April 27, 2000
29
<PAGE>
FORM OF PROXY
FRONT
ABRAXAS PETROLEUM CORPORATION
500 North Loop 1604 East, Suite 100
San Antonio, Texas 78232
This Proxy is Solicited on behalf of the Board of Directors
The undersigned shareholder of Abraxas Petroleum Corporation, a Nevada
corporation (the "Company"), hereby appoints Robert L. G. Watson, Chris E.
Williford and Robert W. Carington, and each of them, as Proxies, each with the
power to appoint his or her substitute, and hereby authorizes them to represent
and to vote, as designated below, all the shares of Abraxas common stock which
the undersigned may be entitled to vote at the Annual Meeting of Stockholders to
be held on May 26, 2000, and any adjournment thereof, with all powers which the
undersigned would possess if personally present.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement of Abraxas dated April 27, 2000.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
BACK
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this
proxy will be voted "FOR" the election of Directors and "FOR" the
Approval of Proposals 2 and 3.
1. ELECTION OF DIRECTORS
FOR the nominee listed below WITHHOLD AUTHORITY
to vote for the nominee
[ ] listed below [ ]
Franklin A. Burke
2. PROPOSAL TO APPROVE THE AMENDMENT TO THE ABRAXAS ARTICLES OF
INCORPORATION
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE THE APPOINTMENT OF ERNST & YOUNG LLP AS AUDITORS OF
ABRAXAS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
CHECK HERE FOR ADDRESS CHANGE [ ] NEW ADDRESS:_______________________
___________________________________
___________________________________
___________________________________
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name
by authorized person.
DATED: ______________, 2000 ___________________________________________
Signature
PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE ___________________________________________
ENCLOSED ENVELOPE. Signature if held jointly
<PAGE>
EXHIBIT A
proposed amendment to article fourth
of Abraxas' articles of incorporation
FOURTH: (a) The total number of shares of all classes of stock which the
corporation shall have authority to issue is (i) 200,000,000 shares with par
value $.01 per share which are to be of a class designated "Common Stock" and
(ii) 1,000,000 shares with par value $.01 per share which are to be of a class
designated "Preferred Stock."
(b) The Board of Directors is hereby expressly granted authority to
authorize from time to time, in accordance with law, the issue of one or more
series of Preferred Stock and, with respect to any such series, to fix by
resolution or resolutions the numbers, powers, designations, preferences and
relative, participating, option or other special rights of such series and the
qualifications, limitations or restrictions thereof including, but without
limiting the generality of the foregoing, the following:
(i) entitling the holders thereof to cumulative, non-cumulative or
partially cumulative dividends, or to no dividends;
(ii) entitling the holders thereof to receive dividends payable on a
parity with, junior to, or in preference to, the dividends payable on any other
class or series of capital stock of the corporation;
(iii) entitling the holders thereof to rights upon the voluntary or
involuntary liquidation, dissolution or winding up of, or upon any other
distribution of the assets of, the corporation, on a parity with, junior to or
in preference to, the rights of any other class or series of capital stock of
the corporation;
(iv) providing for the conversion, at the option of the holder or of
the corporation or both, of the shares of Preferred Stock into shares of any
other class or classes of capital stock of the corporation or of any series of
the same or any other class or classes or into property of the corporation or
into the securities or properties of any other corporation or person, including
provision for adjustment of the conversion rate in such events as the Board of
Directors shall so provide, including provisions for the creation of a sinking
fund for the redemption thereof, or providing for no redemption;
(v) providing for the redemption, in whole or in part, of the shares of
Preferred Stock at the option of the corporation or the holder thereof, in cash,
bonds or other property, at such price or prices (which amount may vary under
different conditions and at different redemption dates), within such period or
periods, and under such conditions as the Board of Directors shall so provide,
including provisions for the creation of a sinking fund for the redemption
thereof, or providing for no redemption;
<PAGE>
(vi) lacking voting rights or having limited voting rights or enjoying
general, special or multiple voting rights;
(vii) providing for the operation of a retirement or sinking fund with
respect thereto or for no such retirement or sinking fund, and, if so, the
extent to and manner in which any such retirement or sinking fund shall be
applied to the purchase or redemption of the shares of such series for
retirement or other corporate purposes and the terms and provisions relative to
the operation thereof;
(viii) providing the limitations or restrictions, if any, to be
effective while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, and upon the purchase,
redemption or other acquisition by the corporation of, the Common Stock or
shares of stock of any other class or any other series of the same class;
(ix) providing the conditions or restrictions, if any, upon the creation
of indebtedness of the corporation or upon the issuance of any additional stock,
including shares of any other class or series;
(x) specifying the number of shares constituting that series and the
distinctive designation of that series; and
(xi) providing any other powers, preferences and relative,
participating, optional and other special rights, and any qualifications,
limitations and restrictions thereof, insofar as they are not inconsistent with
the provisions of these Articles of Incorporation, to the full extent permitted
in accordance with the laws of the State of Nevada.
<PAGE>
