<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Zydeco Energy, Inc.
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF ZYDECO ENERGY, INC.]
1710 TWO ALLEN CENTER, 1200 SMITH STREET
HOUSTON, TEXAS 77002
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 11, 1998
----------------
The Annual Meeting of the Stockholders of Zydeco Energy, Inc., a Delaware
corporation (the "Company"), will be held at the offices of the Company, 1710
Two Allen Center, 1200 Smith Street, Houston, Texas, on June 11, 1998, at
10:00 a.m. Houston time, for the following purposes:
1. To elect six directors of the Company, each to serve until the next
annual meeting.
2. To consider and act upon such other business as may properly come before
the meeting or any adjournments thereof.
A record of stockholders has been taken as of the close of business on April
27, 1998, and only those stockholders of record on that date will be entitled
to notice of and to vote at the meeting.
By order of the Board of Directors,
/s/ John Misitigh
John Misitigh
Secretary
Houston, Texas
April 28, 1998
<PAGE>
ZYDECO ENERGY, INC.
1710 TWO ALLEN CENTER, 1200 SMITH STREET
HOUSTON, TEXAS 77002
----------------
PROXY STATEMENT
----------------
APRIL 28, 1998
SOLICITATION OF PROXY, VOTING, AND REVOCABILITY
This Proxy Statement is furnished to the stockholders of Zydeco Energy,
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company (the
"Board"). The proxies are to be voted at the 1998 Annual Meeting of
Stockholders (the "Meeting") to be held at the offices of the Company at 1710
Two Allen Center, 1200 Smith Street, Houston, Texas, at 10:00 a.m. Houston
time, June 11, 1998, and any adjournments thereof, for the purposes set forth
in the accompanying notice. This Proxy Statement and the accompanying form of
proxy will be mailed to stockholders on or about May 1, 1998.
As of April 27, 1998, the record date for the determination of stockholders
entitled to notice of and to vote at the Meeting, there were outstanding and
entitled to vote 10,357,096 shares of the common stock, $.001 par value, of
the Company (the "Common Stock"). Each share of Common Stock entitles the
holder to one vote on each matter presented at the Meeting. A majority of the
outstanding shares of the Common Stock will constitute a quorum at the
Meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of
business. Abstentions are counted in tabulations of the votes cast on
proposals presented to stockholders, whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved. The six
nominees receiving the most votes for director will be seated as directors.
Proxies will be voted in accordance with the directions specified thereon.
Any proxy on which no direction is specified will be voted for in accordance
with the best judgment of the persons designated as the proxies. Any proxy may
be revoked at any time prior to its exercise by delivery to the Secretary of
the Company of a written notice of revocation or a duly executed proxy bearing
a later date, or by voting in person at the Meeting.
The Board is not aware of any other matters to be presented at the Meeting.
If any other matter should be presented at the Meeting upon which a vote may
properly be taken, shares represented by all duly executed proxies received by
the Company will be voted with respect thereto in accordance with the best
judgment of the persons designated as the proxies.
An Annual Report to Stockholders, containing financial statements for the
year ended December 31, 1997, preceded or accompanies this Proxy Statement.
The mailing address of the Company's principal executive offices is 1710 Two
Allen Center, 1200 Smith Street, Houston, Texas 77002.
- -------------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR STOCK BE REPRESENTED AT THE MEETING REGARDLESS OF
THE NUMBER OF SHARES YOU HOLD. THIS WILL ENSURE THE PRESENCE OF A QUORUM AT
THE MEETING. PLEASE COMPLETE, SIGN AND MAIL THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE EVEN IF YOU INTEND TO BE PRESENT AT THE MEETING.
RETURNING THE PROXY WILL NOT LIMIT YOUR RIGHT TO VOTE IN PERSON OR TO ATTEND
THE ANNUAL MEETING, BUT WILL ENSURE YOUR REPRESENTATION IF YOU CANNOT ATTEND.
THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS USE.
- -------------------------------------------------------------------------------
<PAGE>
PROPOSAL ONE:
ELECTION OF DIRECTORS
NOMINEES
The terms of all six current directors are expiring and each of the persons
named below has been nominated by the Board of Directors for election as a
director of the Company to serve until the 1999 Annual Meeting of Stockholders
or until his successor has been duly elected and qualified. Each of the
nominees is currently a director. No proxy may be voted for more persons than
the number of nominees. Shares of Common Stock represented by duly executed
proxies received by the Company and not marked to withhold authority to vote
for any individual director or for all directors will be voted FOR the
election of all the nominees identified herein. The Board knows of no reason
why any such nominee should be unable or unwilling to serve; but, if such
should be the case, the shares represented by duly executed proxies received
by the Company will be voted for the election of a substitute nominee selected
by the Board of Directors. The six nominees receiving the most votes cast at
the Meeting will be elected as directors.
The following information relates to the nominees:
SAM B. MYERS, JR., age 60, has served since December 1995 as Director,
Chairman of the Board of Directors, and Chief Executive Officer and, until
October 1996, President of the Company and in the same capacity for Zydeco
Exploration, Inc. ("Zydeco Exploration"), the Company's subsidiary, since its
formation in March 1994. Mr. Myers has been an independent oil and gas
operator and private investor since 1961. In addition, Mr. Myers has served as
Chairman of the Board of Directors of Search Capital Group, Inc. ("Search"), a
publicly held specialty financial services company, from August 1985 until May
1995 when he voluntarily resigned and as President and Chief Executive Officer
from August 1985 until August 1993 and again from November 1994 to January
1995. Mr. Myers served as interim President and Chief Executive Officer of
Search, and certain of its finance subsidiaries, for 30 days commencing
December 1994, after the resignation of Search's former President and Chief
Executive Officer. After Mr. Myers' departure, eight finance subsidiaries,
whose assets consist primarily of automobile loan portfolios, voluntarily
filed for protection under Chapter 11 of the federal bankruptcy code in August
1995.
EDWARD R. PRINCE, JR., age 68, has acted as Director and Vice Chairman of
the Board of Directors of the Company since December 1995, served in the same
capacity for Zydeco Exploration since August 1994 and acted as Secretary of
the Company from January 1998 to March 1998. Mr. Prince has been involved in
the geophysical service industry for 35 years. Mr. Prince was a founder of
Digicon Inc., a publicly held geophysical contractor, which is now part of
Veritas DGC, Inc. In 1994, he retired as Chief Executive Officer of Digicon, a
position he held for more than 24 years. Mr. Prince has served the geophysical
industry in various capacities including Chairman of the International
Association of Geophysical Contractors and as a director of the National Ocean
Industries Association and was awarded an honorary membership by the Society
of Exploration Geophysicists. Mr. Prince also serves as a director of
GeoScience Corporation, a publicly held designer and manufacturer of seismic
data acquisition systems, geoscientific software and related products and as a
director of JetFax, Inc., a publicly held manufacturer of multi-function
product office equipment.
JOHN O. SMITH, age 49, was appointed President and Chief Operating Officer
in October 1996, succeeding Sam B. Myers, Jr. who relinquished the office. In
January 1997, Mr. Smith was also named a Director. Mr. Smith has 26 years
experience in the exploration and production sector of the oil and gas
business. He was employed as a landman for Mobil Oil Corporation from 1971-
1974. He subsequently held positions of increasing responsibility with
independent oil and gas companies (Inexco Oil Company 1974-75; Tomlinson
Interests, Inc. 1975-78; Longhorn Oil & Gas Company 1978-83). Since 1984, Mr.
Smith has been President and owner of JOS Energy Corp., an independent
operator in the domestic Gulf Coast and Mid-Continent areas. Additionally,
since 1984, Mr. Smith has provided oil and gas project management and
consulting services to selected domestic and foreign clients. Mr. Smith is a
1970 graduate of the University of Texas with a BBA degree in Petroleum Land
Management.
2
<PAGE>
HARRY C. JOHNSON, age 65, was appointed a Director of the Company in
December 1995. He has over 40 years experience in the oil and gas industry. He
was founder and served as Chief Executive Officer of Red Eagle Resources
Corporation until February 1995. Mr. Johnson has also been actively involved
as a principal in various businesses, including banking, agriculture and
aviation. Mr. Johnson was formerly a registered principal with the National
Association of Securities Dealers, Inc. and was an allied member of The New
York Stock Exchange. Mr. Johnson is a registered professional engineer with a
degree in petroleum engineering from the University of Oklahoma.
CHARLES E. BRADLEY, SR., age 68, was appointed a Director of the Company in
December 1995. He is one of the founders of Stanwich Partners, Inc., a private
investment firm which engages in leveraged buyouts, and has been President, a
Director and a shareholder of that company since its formation in 1982. Mr.
Bradley serves in executive capacities for numerous companies, including
Chairman of the Board of Consumer Portfolio Services, Inc., Reunion Industries
Corp. (also Chief Executive Officer), DeVlieg-Bullard, Inc., Chatwins Group,
Inc., Texon Energy Corporation (also President), Sanitas, Inc. (also
President) and as a Director of General Housewares Corp. and Audit & Survey's
Inc., all of which are publicly-held corporations. Mr. Bradley's previous
experience also includes a position as a general partner in Price Waterhouse,
an international accounting firm.
PHILIP A. TUTTLE, age 56, served as President, Chief Executive Officer,
Chairman of the Board, and a Director of the Company from its formation in
June 1993 until December 1995. Mr. Tuttle has continued to serve as a Director
of the Company since December 1995. Since June 1989, he has been a general
partner of Davis Venture Partners, L.P., a private investment partnership and
since August 1997, he has been a general partner of Davis, Tuttle Venture
Partners, L.P. From November 1990 until October 1995, Mr. Tuttle was a
Director of Quality Tubing, Inc., a manufacturer of steel coil tubing for the
energy services industry, becoming Chairman of the Board in May 1992. Mr.
Tuttle is a founder and was formerly President of the Houston Venture Capital
Association. He was also President and a Director of the Houston Chapter of
the Association for Corporate Growth, Chairman of the Accounting Council at
Rice University-Jones Graduate School of Administration, and a member of the
Board of Governors of the National Association of Small Business Investment
Companies. In addition, Mr. Tuttle serves on the Board of Drypers Corp., a
publicly traded company that manufactures and distributes disposable diapers.
He is a Certified Public Accountant and Fellow of the Institute of Directors,
London, England.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF EACH OF THE ABOVE-NAMED NOMINEES.
BOARD ORGANIZATION AND MEETINGS
The Board met nine times in 1997 either in person or via telephonic
conference connection. No Board member attended fewer than 75% of the total
number of the meetings of the Board.
In January 1996, the Board established an Audit Committee and a Compensation
Committee to act on behalf of the Board and to advise the Board with respect
to specific matters. The Audit Committee met twice in 1997 and the
Compensation Committee met three times in 1997. No member of the Committees
attended fewer than 75% of the total number of meetings held by the relevant
Committee. The Company does not have a nominating committee. The
responsibilities and members of the Audit Committee and the Compensation
Committee are as follows:
Audit Committee. The Company's Audit Committee consists of Messrs. Bradley,
Tuttle and Johnson. The Audit Committee reviews with the Company's independent
public accountants the scope and timing of their audit services and any other
services they are asked to perform, their report on the Company's financial
statements following completion of their audit and the Company's policies and
procedures with respect to internal accounting and financial controls. In
addition, the Audit Committee makes annual recommendations to the Board of
Directors for the appointment of independent accountants for the ensuing year.
3
<PAGE>
Compensation Committee. The Company's Compensation Committee consists of
Messrs. Tuttle, Johnson and Bradley. The Compensation Committee reviews and
approves the compensation and benefits of all officers of the Company and
administers any stock option or other similar plan benefiting the employees
and officers of the Company.
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
Set forth below is certain information concerning the executive officers of
the Company, including the business experience of each during the past five
years. Information regarding Mr. Myers, Mr. Prince and Mr. Smith is set forth
above under "Nominees."
JOHN W. MCTIGUE, JR., age 42, has acted as Vice President of the Company
since December 1995. He served in the same position and as a Director of
Zydeco Exploration since August 1994. Mr. McTigue has been involved in
developing 3D seismic workstation technology and interpretation techniques for
over fifteen years while working in various capacities with Shell Development
Company (1984 to 1990), GeoQuest Systems, Inc. (1990 to 1992), INEXS, Inc.
(1992 to 1993), and Paradigm Geophysical Corp. (1993 to 1994). Mr. McTigue
holds Bachelor of Science and Master of Science degrees in Geology/Geophysics
from Yale University and the University of Arizona, respectively.
JOHN MISITIGH, age 50, was appointed Controller, Chief Accounting Officer
and Secretary in March 1998. From July 1995 to March 1998, except for serving
as Vice President and Controller from May 1996 to February 1997 at the Safe
Seal Company, Inc., an industrial services company, Mr. Misitigh was a
consultant engaged in performing accounting and related services to primarily
small to medium sized companies. Prior to that time, Mr. Misitigh was
affiliated with energy companies for 19 years in various positions. From 1987
until July 1995, he served as the Vice President, Secretary and Treasurer of
Southern Mineral Corporation, a public oil and gas acquisition, exploration
and production company. Before that time, he was with Zapata Exploration
Company (1976-1978), Buttes Resources (1978-1979), Adams Resources and Energy,
Inc. (1979-1982) and Langham Petroleum Exploration Corp. (1982-1987). Mr.
Misitigh is a Certified Public Accountant and holds a Bachelor of Accountancy
degree from the University of Houston and a Bachelor of Arts degree from The
Ohio State University.
NORMAN S. NEIDELL, age 59, joined the Company as Vice President in July
1997. Dr. Neidell founded Wavefield Image, Inc. in September 1995 and served
as Chairman and President. In June 1989, he co-founded Gandalf Explorers
International, Ltd. (now MMS Petroleum PLC), of which he currently serves as a
Director and technical advisor and which is an Irish company also traded on
the London AIM Stock Exchange. In June 1977, he co-founded Zenith Exploration
Co., Inc., an oil and gas company which developed high technology methods for
seismic stratigraphic exploration and served as a Director from inception
until February 1987 and as its Chairman and President from 1985 to 1987. In
October 1973, he co-founded GeoQuest International, Inc. and was a major
shareholder and a Director until April 1980. Dr. Neidell left this geological
and geophysical consulting company in September 1982. Dr. Neidell was a
lecturer and an Adjunct Professor in the Geology Department of the University
of Houston from 1971 to 1987. He is a Past President and Honorary Member of
the Geophysical Society of Houston, a Distinguished Lecturer of the Society of
Exploration Geophysicists ("SEG"), a Past Associate Editor of Geophysics, and
a member of several AAPG and SEG committees. He graduated with a BS in
Mathematics from New York University, a Post Graduate Diploma in Applied
Geophysics from Imperial College, and a Ph.D. in Geodesy and Geophysics from
Cambridge University.
4
<PAGE>
The following table reflects all forms of compensation for services to the
Company and its subsidiaries for the years ended December 31, 1997, 1996, and
1995, of those individuals who were during the fiscal year ended December 31,
1997 (i) the Chief Executive Officer, (ii) each of the four other most highly
compensated executive officers of the Company and (iii) two former officers
who terminated their employment prior to the end of 1997, (collectively, the
"Named Executives").
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- ---------------
OTHER ANNUAL STOCK ALL OTHER
NAME AND POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS GRANTED COMPENSATION ($)(2)
----------------- ---- ---------- --------- ---------------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Sam B. Myers, Jr........ 1997 $150,000 $ - $ - $11,957
Chief Executive Officer 1996 $150,000 $ - $ - $ 9,651
1995 $ 69,500(/1/) $ - $ - $ 724
Edward R. Prince, Jr.... 1997 $150,000 $ - $ - $ 1,346
Vice Chairman 1996 $150,000 $ - $ - $ -
1995 $ - $ - $ - $ -
John O. Smith........... 1997 $150,000 $ - $ - $11,948
President and Chief 1996 $ 37,500(/3/) $ - $ - 200,000 $28,670(/4/)
Operating Officer 1995 $ - $ - $ - $ -
W. Kyle Willis.......... 1997 $ 84,487(/5/) $ - $ - $11,803
Vice President & 1996 $100,000 $ - $ - 150,000 $ 8,841
Treasurer 1995 $ - $ - $ - $ -
Stephen W. Knecht....... 1997 $101,827(/6/) $ - $ - $14,008(/6/)
Vice President 1996 $150,000 $ - $ - $ 7,367
1995 $ 39,250(/1/) $ - $ - $ 701
John W. McTigue, Jr..... 1997 $108,333 $ - $ - $ 7,908
Vice President 1996 $100,000 $ - $ - $ 5,922
1995 $ 18,665(/1/) $ - $ - $ 518
Norman S. Neidell....... 1997 $ 75,000(/7/) $ - $ - 150,000 $25,011(/8/)
Vice President 1996 $ - $ - $ - $ -
1995 $ - $ - $ - $ -
</TABLE>
- --------
(1) From January 1, 1995, to December 20, 1995, no officer received any
compensation other than reimbursement for any reasonable business expense
incurred in connection with activities on behalf of the Company. After
December 20, 1995, the date of the acquisition by merger of Zydeco
Exploration (the "Merger"), the Company paid all officers' salaries for
the remainder of 1995 in amounts which did not exceed $6,250 for any one
person. In addition, after December 20, 1995, Zydeco Exploration paid
accrued compensation which had been deferred from earlier in 1995 to
Messrs. Myers, Knecht, and McTigue in the amounts of $66,000, $33,000, and
$12,498 respectively. (Prior to December 20, 1995, Zydeco Exploration was
an independent, privately held company.)
(2) Includes the Company's portion of expenses incurred under the Company's
health and long-term disability plans under the same terms and conditions
as available to all employees.
(3) Mr. Smith's employment with the Company commenced October 7, 1996.
(4) Includes $27,156 in consulting fees paid to Mr. Smith in 1996 for services
rendered prior to his employment by the Company.
(5) Mr. Willis terminated his employment with the Company effective November
5, 1997.
(6) Mr. Knecht terminated his employment on September 4, 1997. Included in All
Other Compensation is a $6,250 severance payment.
(7) Dr. Neidell's employment with the Company commenced July 1, 1997. Dr.
Neidell is expected to receive an annual salary of $150,000 in 1998. See
also "Certain Relationships and Related Transactions" for a discussion of
Wavefield Image, Inc. a privately held company founded by Dr. Neidell and
acquired by the Company on July 1, 1997.
(8) Includes $20,000 paid to Dr. Neidell as a prepayment for the rental of
certain office furniture for one year commencing July 1, 1997.
5
<PAGE>
OPTION GRANTS
The following table sets forth information with respect to the options to
purchase shares of common stock granted under all stock option plans to the
Chief Executive Officer or the Named Executives in the fiscal year ended
December 31, 1997:
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICES APPRECIATION
FOR THE OPTION
INDIVIDUAL GRANTS TERM(3)
- ---------------------------------------------------------------------- -------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEE IN BASE PRICE EXPIRATION
NAME GRANTED(1) FISCAL YEAR ($/SH)(/2/) DATE 5% ($) 10% ($)
---- ---------- ----------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Norman S. Neidell....... 150,000 29.8% $5.41 7/1/07 $510,348 $1,293,322
</TABLE>
- --------
(1) One-fourth of these options vest on each of the first four anniversary
dates following the date of grant. Options are exercisable within the ten-
year period from the date of grant subject to the vesting schedule.
(2) The exercise price of all options granted during 1997 was equal to the
market value of the underlying Common Stock on the date of grant.
(3) These amounts represent assumed rates of appreciation in the price of the
Company's Common Stock during the term of the options. Actual gains, if
any, on stock option exercises will depend on the future price of the
Common Stock and overall stock market conditions. There is no
representation that the rates of appreciation reflected in this table will
be achieved.
OPTION VALUES
The following table provides information concerning the value of unexercised
options held as of December 31, 1997, by the Company's Chief Executive Officer
and its other Named Executives (no options were exercised by the Chief
Executive Officer or any Named Executives during 1997). The fair market value
of the shares of Common Stock underlying such options was determined by using
the closing price of the Company's Common Stock, which was $2.25 per share as
of December 31, 1997.
OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, OPTIONS AT DECEMBER 31,
1997 1997
---------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sam B. Myers, Jr......... - - - -
Edward R. Prince, Jr..... 234,376 78,126 $152,344 $ 50,782
John O. Smith............ 50,000 150,000 $ - $ -
W. Kyle Willis........... 37,500(/1/) - $ - $ -
Stephen W. Knecht........ - - $ - $ -
John W. McTigue, Jr...... 468,753 156,251 $304,689 $101,563
Norman S. Neidell........ - 150,000 $ - $ -
</TABLE>
- --------
(1) Options exercisable at December 31, 1997 expired on February 5, 1998.
AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS
In 1995, Zydeco Exploration entered into employment agreements with Messrs.
Knecht and McTigue. Each of the agreements provides (i) for a four year term
ending December 31, 1998 (the "Primary Term"), (ii) that Zydeco Exploration
may terminate employment with or without cause during the Primary Term, (iii)
for a base
6
<PAGE>
salary of $150,000 and $100,000 for Messrs. Knecht and McTigue, respectively,
subject to the Zydeco Exploration Board's discretion to elect to defer up to
50% of the base salary for not more than one year, (iv) for the payment of
base salary for the entirety of the Primary Term if the employee is terminated
other than for death, disability or for cause, (v) if terminated for "cause"
during the Primary Term, the agreement is terminated immediately and Zydeco
Exploration shall have no further payment obligations and (vi) that the
employee will retain confidentiality of certain information and will not
compete in the Timbalier Trench or Louisiana Transition Zone with Zydeco
Exploration for a period ended one year after the expiration of the Primary
Term or the termination of the agreement, whichever occurs first.
On January 15, 1998, the Company executed a termination agreement with Mr.
Knecht. The termination agreement provided that the Company would purchase
200,000 shares of the Company's common stock at the then current market price
of $2.125 per share from a trust established for the benefit of Mr. Knecht's
descendants and assign to Mr. Knecht a 1/2% of 8/8ths overriding royalty
interest in certain Company-owned non-productive leases which were subject to
prior agreements with Mr. Knecht. No such overriding royalty interest was
assigned to leases obtained in connection with the Company's West Cameron
Seismic Project.
Mr. McTigue's agreement also provided for the issuance of certain employee
stock options under the employee stock option plan then in effect for Zydeco
Exploration.
In connection with the acquisition of Wavefield Image, Inc. ("Wavefield"),
the Company entered into an employment agreement with Dr. Norman S. Neidell,
the founder and principal shareholder of Wavefield. The agreement provides (i)
for an initial four year term ending July 1, 2001, ("Initial Term"), (ii) that
the Company may terminate employment with or without cause during the Initial
Term, (iii) for a base salary of $150,000, (iv) for the payment of the base
salary for the remainder of the Initial Term if Dr. Neidell is terminated
other than for death, disability or cause, or he terminates his employment for
good reason, (v) if terminated for "cause" during the Initial Term, the
agreement is terminated immediately and the Company shall have no further
payment obligations and (vi) that Dr. Neidell will retain confidentiality of
certain information and will not compete with the Company for a period ending
one year after the expiration of the Initial Term or the termination of the
agreement, whichever occurs first. In addition, the Company agreed to pay Dr.
Neidell $20,000 per year for four years commencing July 1, 1997, in connection
with the rental of certain office furniture and equipment.
The Company has not entered into any other employment agreements.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The executive compensation program of the Company is administered by the
Compensation Committee of the Board of Directors (the "Compensation
Committee"). The Compensation Committee considers and implements the Company's
compensation philosophy and the compensation of the Chief Executive Officer
and all other executive officers. The Compensation Committee is composed of
Messrs. Tuttle, Bradley and Johnson, each of whom is an independent, non-
employee director of the Company, and an "outside director" within the meaning
of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code").
Set forth below is the Report to Stockholders of the Compensation Committee.
This Report and the following Performance Graph have been prepared for
inclusion in this Proxy Statement in anticipation of the 1998 Annual Meeting
of Stockholders. The Report and Performance Graph are not to be included or
incorporated by reference into any other filing required under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent the
Report or the Performance Graph is specifically and expressly included with or
incorporated into such other filing. The Report is not to be considered
soliciting material as such term is used in the proxy rules of the Securities
and Exchange Commission.
7
<PAGE>
REPORT OF THE ZYDECO ENERGY, INC. COMPENSATION COMMITTEE
FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
The Compensation Committee was formed on January 4, 1996. The Compensation
Committee reviews and establishes the compensation of the executive officers
and key employees of the Company. Such compensation may include salaries,
bonuses, stock options, appreciation rights and similar awards pursuant to the
1996 Incentive Plan.
Compensation Philosophy
Since its formation in January 1996, the Compensation Committee has
discussed compensation and philosophy with the directors who are executive
officers of the Company. Consistent with those discussions and in
consideration of the business goals of the Company, the Compensation Committee
has developed a compensation philosophy that the Committee members believe is
designed to attract and retain talented officers, managers and employees
within the context of the Company's present business plan. The Committee's
present philosophy with respect to executive employee compensation is to
attract and retain executive talent of the highest quality through emphasizing
equity appreciation incentives without incurring excessive cash obligations.
The Company emphasizes incentive compensation (primarily stock based) in order
to closely align the interests of the executive officers and the Company's
stockholders. By providing relatively higher stock incentives, the Company is
also able to maintain executive salaries at reasonable levels in recognition
of the need to conserve capital until the Company can demonstrate cash flow
improvements from exploration activities.
Compensation to Chief Executive Officer
There is no formal arrangement concerning the compensation of Mr. Myers. The
annual base salary of Sam B. Myers, Jr., the Company's Chairman and Chief
Executive Officer, was initially established at $150,000 when the Company
first acquired Zydeco Exploration in December 1995. The Committee has not
increased Mr. Myers' base salary since that time. The Committee decided to
maintain Mr. Myers' annual salary at $150,000 for 1997. In making such
determination, the Committee evaluated a number of factors, including Mr.
Myers' responsibilities, his general background and qualifications, his
contribution to the achievement of various corporate and personal milestones,
and compensation levels for executives in Mr. Myers' position and with his
background at peer group companies. The Committee has not attached any
particular relative weighting to the foregoing factors (or any other factors
which the Committee may also consider in reaching compensation decisions for
the Company's executive officers). The Committee also took into account the
fact that to date Mr. Myers has declined to be eligible for any awards under
the Company's 1996 Equity Incentive Plan.
Deductibility of Compensation
Section 162(m) of the Code limits the amount of compensation a corporation
may deduct as a business expense paid to its Chief Executive Officer or any of
its four other most highly compensated officers to $1,000,000 in any year
except to the extent that such compensation qualifies as "performance-based
compensation" (or meets other exceptions not relevant here). All compensation
payments in 1997 to the executive officers named in the Summary Compensation
Table will be fully deductible. The Compensation Committee's present intention
is to comply with the requirements of Section 162(m) unless the Compensation
Committee feels that required changes would not be in the best interests of
the Company or its stockholders.
Submitted this 23rd day of April, 1998 by
the Members of
The Compensation Committee of Zydeco
Energy, Inc.
Philip A. Tuttle
Charles E. Bradley, Sr.
Harry C. Johnson
8
<PAGE>
COMMON STOCK PERFORMANCE GRAPH
The following line graph compares the cumulative total average stockholder
return of the Common Stock with the cumulative total returns since the
Company's inception to (1) the S&P 500 Stock Index and (2) an index composed
of Crude Petroleum and Natural Gas Companies classified as SIC codes 1310-1319
and whose stocks trade on either the New York Stock Exchange, the American
Stock Exchange or the NASDAQ ("Crude Petroleum and Natural Gas Index").
Although the initial trading date of the Company's Common Stock was December
21, 1993, it did not actively engage in any business and did not become an
operating company with oil and gas exploration activities until December 20,
1995. The graph tracks the performance of the Company's Common Stock from
December 21, 1995 and sets the index level for all series to $100.00 on such
date. The listed returns assume that dividends are reinvested.
FIVE YEAR TOTAL RETURN
<TABLE>
<CAPTION>
TOTAL RETURNS INDEX FOR: 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
------------------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
[ ] Zydeco Energy, Inc.. $106.00 $100.00 $ 36.00
. S&P 500 Stocks...... $65.90 $72.33 $73.32 $100.91 $124.41 $166.07
X NYSE/AMEX/NASDAQ
Stocks............. $72.67 $84.26 $82.12 $100.52 $132.05 $131.31
(SIC 1310-1319 US Companies)
Crude Petroleum and Natural Gas
</TABLE>
NOTES
Indexes provided by The Center for Research in Security Prices, The
University of Chicago Graduate School of Business.
9
<PAGE>
COMPENSATION OF DIRECTORS
In 1997, nonemployee directors received fees of $1,000 per month for serving
on the Board of Directors and its Committees and reimbursement of reasonable
expenses incurred in attending meetings.
In addition, in 1996 the Company adopted the 1996 Non-employee Directors
Stock Option Plan (the "Directors Plan"). The Board has granted 15,000 options
to each of Messrs. Tuttle, Bradley and Johnson, pursuant to the Directors
Plan. The options granted vest in one-third increments annually with the first
one-third vesting April 1, 1997. The exercise price of the options granted is
$6.69, the average of the high bid price and low asked price for the Common
Stock on the date of the grant.
GUIDELINES FOR INSIDER SALES
While the Company has generally discouraged officers, directors and
employees from selling Common Stock while the Company is in the initial
exploration phase, the Company acknowledges that sales by the Company's
insiders may occur periodically. The Company has implemented an insider
trading policy for officers, directors and employees designed to advise
insiders who may trade in Common Stock or other public securities of the
Company of the restrictions on such trading imposed by federal securities
laws. The policy provides for advance notice to Company management who, with
the assistance of Company counsel, will advise Company insiders on the
possible existence of material non-public information regarding the Company.
Persons trading in Company stock in violation of such policy are subject to
discipline.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than ten percent of the Company's common
stock, to file reports of ownership and changes in ownership with the
Commission and The Nasdaq Stock Market. Based on the Company's review of the
copies of such reports received by the Company and on written representations
received by the Company, the Company believes that no director, officer or
holder of more than ten percent of the Common Stock or Preferred Stock failed
to file on a timely basis the reports required by Section 16(a) of the
Exchange Act during fiscal 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 1, 1997, the Company acquired all of the outstanding capital stock
of Wavefield Image, Inc. ("Wavefield"), the owner of the Wavefield Imaging
Technology, a patented data processing technique which has been utilized by
the Company in its seismic data acquisition phase of seismic surveys. Dr.
Norman S. Neidell, a principal shareholder of Wavefield and inventor of the
Wavefield Imaging Technology, entered into a four year employment agreement
with the Company and was appointed Vice President-Innovations of the Company.
Under Dr. Neidell's agreement, Dr. Neidell retained an option to obtain a
limited, nontransferable license to the Wavefield Imaging Technology under
certain conditions. The Company also granted him stock options, vesting over
four years, to purchase 150,000 shares of the Company's Common Stock. The
Company and Dr. Neidell have also agreed to negotiate in good faith to form an
agreement between them to own and exploit any non-seismic applications of the
Wavefield Imaging Technology. In addition, the Company paid Dr. Neidell
$20,000 in July 1997 as a one year prepayment for the rental of certain office
furniture and equipment.
The Company engaged the services of a law firm, including the services of a
partner in the firm who is a son of Mr. Prince. The Company incurred costs of
approximately $220,343 to this firm during the year ended December 31, 1997.
Also in 1997, the Company paid $262,380 for software and related services to a
vendor of which Mr. Prince is a director.
The Company believes all of the transactions with related parties have been
on terms no less favorable to the Company than those terms which may have been
obtained from unrelated third parties.
None of the officers or directors of the Company is related to any other
executive officer or director of the Company.
10
<PAGE>
BENEFICIAL OWNERSHIP
The following table sets forth certain information, as of January 31, 1998,
regarding beneficial ownership of Common Stock of each shareholder who is
known by the Company to beneficially own more than 5% of Common Stock, each
Director, each Named Executive, and all directors and executive officers as a
group.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIAL OWNERSHIP
-------------------------
NUMBER OF PERCENTAGE
NAME AND ADDRESS (IF REQUIRED) OF BENEFICIAL OWNER SHARES OF TOTAL
-------------------------------------------------- --------- ----------
<S> <C> <C>
Richard L. Morgan..................................... 1,562,510(/1/) 15.1%
700 North Pearl Street, Suite 2170
Dallas, Texas 75201
David M. Fender....................................... 1,558,393(/2/) 15.0%
116 East Front Street
Tyler, Texas 75702
John W. McTigue, Jr................................... 468,753(/3/) 4.5%
Edward R. Prince, Jr.................................. 250,001(/3/) 2.4%
Norman S. Neidell..................................... 150,000 1.4%
Sam B. Myers, Jr...................................... 133,215 1.3%
Philip A. Tuttle...................................... 62,512(/3/) 0.6%
John O. Smith......................................... 50,700(/3/) 0.5%
W. Kyle Willis........................................ 37,500(/4/) 0.4%
Charles E. Bradley, Sr................................ 15,000(/3/) 0.1%
Harry C. Johnson...................................... 10,000(/3/) 0.1%
Directors and Officers as a Group (10 Persons)........ 1,177,681(/3/) 11.4%
</TABLE>
- --------
(1) Includes 781,255 shares owned by The SBM III Trust and 781,255 shares
owned by The MFM Trust; Mr. Morgan is trustee of both trusts. The SBM III
Trust is a trust established for the benefit of the children of Sam B.
Myers, III. The MFM Trust is a trust established for the benefit of the
children of Melanie F. Myers. Mr. Morgan has sole voting and dispositive
power with respect to such shares. Mr. Sam B. Myers, Jr. does not have and
disclaims any beneficial ownership of the shares owned by the trusts.
(2) Includes 30,000 shares owned personally by Mr. Fender and 1,528,393 shares
owned by The Bon Temps Trust for which Mr. Fender is trustee. The Bon
Temps Trust is a trust established for the benefit of the children of Sam
B. Myers, Jr. Mr. Fender has sole voting and dispositive power with
respect to such shares. Mr. Myers does not have and disclaims any
beneficial ownership of the shares owned by the trust.
(3) These amounts include shares of Common Stock issuable upon exercise of
options that are presently exercisable within 60 days.
(4) Options exercisable by Mr. W. Kyle Willis expired on February 5, 1998.
11
<PAGE>
INDEPENDENT ACCOUNTANT
The Audit Committee of the Board of Directors has not selected the Company's
independent accountant for the fiscal year ending December 31, 1998.
Representatives of Arthur Andersen LLP, the Company's independent accountants
for the fiscal year ended December 31, 1997, are expected to be present at the
Meeting, will have an opportunity to make a statement if they so desire, and
will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for presentation at the 1999
Annual Meeting of Stockholders must forward such proposal to the Secretary of
the Company so that the Secretary receives it no later than December 30, 1998.
FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "1997 10-K"), as filed with the Securities and Exchange
Commission, including the financial statements and the financial statement
schedules thereto, is included in the Annual Report to Stockholders mailed to
each Stockholder entitled to vote at the Meeting. The Company will furnish to
any such person any exhibit described in the list accompanying the 1997 10-K,
upon the payment, in advance, of the specified reasonable fees related to the
Company's furnishing of such exhibit(s). Requests for copies of such report
and/or exhibit(s) should be directed to Secretary, Zydeco Energy, Inc., 1710
Two Allen Center, 1200 Smith Street, Houston, Texas 77002.
OTHER MATTERS
The cost of soliciting proxies will be borne by the Company. In addition to
solicitations by mail, a number of officers, directors and regular employees
of the Company may, if necessary to ensure the presence of a quorum and at no
additional expense to the Company, solicit proxies in person or by telephone
or telegraph. The Company will make arrangements with brokerage firms, banks
and other nominees to forward proxy materials to beneficial owners of shares
and will reimburse such nominees for their reasonable costs.
The persons designated to vote shares covered by proxies intend to exercise
their judgment in voting such shares on other matters that may come before the
Meeting. Management does not expect, however, that any matters other than
those referred to in this Proxy Statement will be presented for action at the
Meeting.
The prompt return of your proxy will be appreciated and helpful in obtaining
the necessary vote. Therefore, whether or not you expect to attend the Annual
Meeting, please sign the proxy and return it in the enclosed envelope.
By Order of the Board of Directors,
/s/ John Misitigh
John Misitigh
Secretary
Date: April 28, 1998
12
<PAGE>
[LOGO OF ZYDECO ENERGY, INC.]
PROXY
ZYDECO ENERGY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
ANNUAL MEETING JUNE 11, 1998
The undersigned, having received the notice and accompanying Proxy Statement
for the 1998 Annual Meeting, hereby constitutes and appoints SAM B. MYERS, JR.
and EDWARD R. PRINCE, JR. (the "Proxy Committee"), and each of them, his true
and lawful agents and proxies with power of substitution in each, to represent
and vote at the Annual Meeting to be held on June 11, 1998, or at any
adjournment thereof, on all matters coming before said meeting, all shares of
ZYDECO ENERGY, INC. which the undersigned may be entitled to vote. The above
proxies are hereby instructed to vote as indicated below:
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. Election of Directors; Nominees: Sam B. Myers, Jr., Edward R. Prince, Jr.,
Charles E. Bradley, Sr., Harry L. Johnson, John O. Smith, Philip A. Tuttle
[_] FOR (except as [_] WITHHOLD AUTHORITY to
marked below) vote for all nominees
For, except vote withheld from the following nominee(s): ___________________
2. In the discretion of the Proxy Committee, upon other matters as may properly
come before the meeting.
[_] FOR [_] AGAINST [_] ABSTAIN
(CONTINUED ON REVERSE SIDE)
[LOGO OF ZYDECO ENERGY, INC.]
This proxy, when properly executed, will be voted in the manner directed by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR proposals (1) and (2). The Proxy Committee is authorized to vote in their
discretion on any other matters that may properly come before the meeting. You
are encouraged to specify your choices by marking the appropriate boxes above,
but you need not mark any boxes if you wish to vote in accordance with the
Board of Directors' recommendations. The Proxy Committee cannot vote your
shares unless you sign and return this card.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE(S) ___________________________
DATE ___________________________________
NOTE: Executors, administrators,
trustees, etc., please give full title
as such. If a corporation, please sign
full corporate name by duly authorized
officer. Joint owners should each sign
personally.
