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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE
ACT OF 1934
Filed by Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only [as permitted by Rule
14a-6(e)(2)]
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 14a-11(c) or Rule 14a-12
TATHAM OFFSHORE, 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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:*
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[ ] 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. Identity the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.
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4) Date filed:
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*Set forth the amount on which the filing fee is calculated and state how it
was determined.
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TATHAM OFFSHORE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 13, 1997
TO THE STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders
of Tatham Offshore, Inc. ("Tatham Offshore") to be held at the Four Seasons
Hotel, 1300 Lamar Street, Houston, Texas at 9:30 a.m., Central Standard Time,
on Thursday, November 13, 1997, for the following purposes:
1. To elect eleven directors of Tatham Offshore to hold office
until the next annual meeting of stockholders and until their
respective successors are duly elected and qualified;
2. To ratify the Board of Directors' appointment of Price
Waterhouse LLP as Tatham Offshore's independent accountants
for the fiscal year ending June 30, 1998;
3. To ratify the Board of Directors' approval of Tatham Offshore's
Restructuring Option Agreement with DeepTech International
Inc.;
4. To authorize the Board of Directors to effect a reverse split
of Tatham Offshore common stock of up to ten-for-one and the
related amendment to the Company's Certificate of
Incorporation; and
5. To transact such other business as may properly be brought
before the meeting or any adjournment(s) thereof.
Holders of record of Tatham Offshore's common stock at the close of
business on October 15, 1997 will be entitled to notice of and to vote at the
meeting or any adjournment(s) thereof.
Stockholders who do not expect to attend the meeting are requested to
sign and return the enclosed proxy, for which a postage-paid, return envelope
is enclosed. The proxy must be signed and returned in order to be counted.
By Order of the Board of Directors,
THOMAS P. TATHAM
Chairman of the Board
Houston, Texas
October 27, 1997
<PAGE> 3
TATHAM OFFSHORE, INC.
7400 Texas Commerce Tower
600 Travis Street
Houston, Texas 77002
PROXY STATEMENT
1997 ANNUAL MEETING OF STOCKHOLDERS
----------------
The enclosed form of proxy is solicited by the Board of Directors of
Tatham Offshore, Inc. ("Tatham Offshore" or the "Company") to be used at the
1997 Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Four Seasons Hotel, 1300 Lamar Street, Houston, Texas at 9:30 a.m., Central
Standard Time, on Thursday, November 13, 1997. This Proxy Statement and the
related proxy are to be first sent or given to the stockholders of Tatham
Offshore on or about October 27, 1997. Any stockholder giving a proxy may
revoke it at any time provided written notice of such revocation is received by
the Secretary of Tatham Offshore before such proxy is voted; otherwise, if
received in time, properly completed proxies will be voted at the meeting in
accordance with the instructions specified thereon. Stockholders attending the
Annual Meeting may revoke their proxies and vote in person.
Holders of record at the close of business on October 15, 1997 of
Tatham Offshore's common stock, $.01 par value ("Common Stock"), will be
entitled to one vote per share on all matters submitted to a vote of the
stockholders at the meeting. On September 30, 1997, there were outstanding
27,655,727 shares of Common Stock, and 24,343,931 shares of $.01 par value,
preferred stock ("Preferred Stock"). The holders of Preferred Stock will not
be entitled to vote on matters submitted to the stockholders at the meeting.
Tatham Offshore's Annual Report for the fiscal year ended June 30,
1997, including financial statements, is being mailed herewith to all
stockholders entitled to vote at the Annual Meeting. The Annual Report does
not constitute a part of the proxy soliciting material.
ELECTION OF DIRECTORS
(ITEM 1)
At the Annual Meeting, eleven directors are to be elected to hold
office until the next succeeding annual meeting of the stockholders and until
their respective successors have been elected and qualified. Nine of the
director nominees are currently directors of Tatham Offshore. Proxies cannot
be voted for a greater number of persons than the number of nominees named on
the enclosed form of proxy. A plurality of the votes cast in person or by
proxy by the holders of Common Stock is required to elect a director.
Accordingly, under Delaware law and Tatham Offshore's Restated Certificate of
Incorporation and By-laws, abstentions and "broker non-votes" would not have
the same legal effect as a vote against a particular director. A broker
non-vote occurs if a broker or other nominee does not have discretionary
authority and has not received instructions with respect to a particular item.
Stockholders may not cumulate their votes in the election of directors. The
Board of Directors recommends a vote "FOR" each of the following eleven
nominees.
The following information regarding the director nominees of Tatham Offshore,
their principal occupations, employment history and directorships in certain
companies is as reported by the respective individuals.
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DIRECTOR NOMINEES
THOMAS P. TATHAM, age 52, has served as Chairman of the Board and a
Director of Tatham Offshore since its inception in 1988. In addition, Mr.
Tatham has served as Chairman of the Board, Chief Executive Officer and a
Director of DeepTech International Inc. ("DeepTech") and Chairman of the Board
of Leviathan Gas Pipeline Company ("Leviathan"), affiliates of Tatham Offshore,
since October 1989 and February 1989, respectively. In addition, Mr. Tatham
served as Chief Executive Officer of Leviathan from February 1989 until June
1995. Mr. Tatham has over 27 years experience in the oil and gas industry. He
founded Mid American Oil Company in 1970 and served as Chairman of the Board
and Chief Executive Officer until he sold his interest therein to Centex
Corporation in 1979. In 1979, Mr. Tatham founded Tatham Corporation to acquire
Sugar Bowl Gas Corporation ("Sugar Bowl"), the second largest intrastate
pipeline system in Louisiana. He served as Chairman of the Board of Tatham
Corporation from 1979 to December 1983, at which time it sold the assets of
Sugar Bowl to a joint venture between MidCon Corp. and Texas Oil and Gas, Inc.
From 1984 to 1988, Mr. Tatham pursued personal investments in various
industries, including the oil and gas industry. Mr. Tatham served as a
director of J. Ray McDermott, S.A. from its inception in February 1995 through
August 1997.
KENNETH E. BEENEY, age 38, has served as a Director and Vice President
- - Chief Geophysicist of Tatham Offshore since August 1993. Mr. Beeney has 16
years of exploration experience, with a primary focus in the Gulf of Mexico.
Prior to joining Tatham Offshore in 1989, Mr. Beeney worked for Tenneco Oil
Company for eight years and Anadarko Petroleum Corporation on a variety of
exploration assignments. Mr. Beeney received a B.S. in Geophysics from the
Colorado School of Mines.
PHILLIP G. CLARKE, age 62, has served as a Director of Tatham Offshore
since March 1995. Mr. Clarke has worked in the oil and gas industry for 40
years. He was initially employed by Texaco, Inc. for approximately eight
years, serving in various engineering positions. In 1965, Mr. Clarke was
employed by Placid Oil Company ("Placid") where he accumulated an additional 30
years of diversified experience. In 1977, Mr. Clarke was elevated to the
position of Vice President of Operations for Placid's world-wide activities and
held that position until his early retirement in 1995. Following his Placid
retirement, Mr. Clarke continued his oil industry activity by joining several
associates in forming Rising Star Energy, LLC, a Dallas, Texas based
independent energy company where he is currently employed. Mr. Clarke received
a B.S. degree in Mechanical Engineering from Oklahoma State University.
ANTOINE GAUTREAUX, Jr., age 44, has served as a Director of Tatham
Offshore since October 1996, Chief Operating Officer of Tatham Offshore since
July 1996 and as Senior Vice President - Operations from September 1995 to July
1996. Prior to joining the Company, Mr. Gautreaux was employed by Placid for
21 years in various capacities, including Manager of Drilling and Production.
Mr. Gautreaux received a B.S. degree from Nichols State University.
E. LYNN HILL, age 51, has served as Chief Financial Officer and
Secretary of Tatham Offshore since March 1997. Prior to joining Tatham
Offshore, Mr. Hill served as Senior Vice President - Finance, Administration
and Secretary - Treasurer of Global Natural Resources, Inc. from July 1988 to
March 1997. Mr. Hill has over 28 years of experience in finance and auditing
in energy related companies and in public accounting. Mr. Hill received a
B.B.A. degree from the University of North Texas and is a certified public
accountant.
EDWARD L. MOSES, JR., age 61, has served as Senior Vice President -
Engineering and Production of DeepTech since 1992 and Managing Director and a
Director of Deepwater Production Systems, Inc. since August 1993. From 1991 to
1992, he served as Senior Vice President and a Director of Tatham Offshore.
From 1989 to 1991, Mr. Moses served as Vice President - Engineering of Tatham
Offshore. Mr. Moses has worked for over 30 years in the oil and gas industry.
Prior to joining DeepTech, he worked for 12 years as an independent consultant
in the oil and gas industry. Prior thereto, he spent 18 years working for
Superior Oil Company where he served as Manager of International Drilling
Operations. Mr. Moses has a B.S. in Petroleum Engineering from Texas A&M
University.
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CLYDE E. NATH, age 63, has served as a Director of Tatham Offshore
since March 1995. Mr. Nath worked in the oil and gas industry for 40 years
with Kerr-McGee Corp., holding various positions in Kerr-McGee's Exploration
and Production Division throughout his career. From 1985 until his retirement
in December 1994, Mr. Nath was Vice President of Exploration for the Gulf of
Mexico Region of Kerr-McGee's Exploration and Production Division. Mr. Nath
holds a Bachelor's degree in Geology from Oklahoma City University. He is a
member of the American Association of Petroleum Geologists, the Houston
Geological Society and American Petroleum Institute.
JAMES G. NIVEN, age 51, has served as a Director of Tatham Offshore
since June 1994 and as a General Partner of Pioneer Associates, a venture
capital investment company, since 1982. Mr. Niven has been a Senior Vice
President of Sotheby's Inc. since November 1996 and from 1989 to 1994 was
Chairman of the Board of Global Natural Resources Inc. Mr. Niven is currently a
Director of The Lynton Group, Inc., Noel Group, Inc., Lincoln Snacks Company and
HealthPlan Services Inc. He is a member of the Board of Managers of Memorial
Sloan-Kettering Cancer Center, and a Trustee of the Museum of Modern Art, and
the National Center for Learning Disabilities, Inc.
JONATHAN D. POLLOCK, age 34, is a Portfolio Manager of Elliott
Associates, L.P. ("Elliott Associates") responsible for the firm's oil and gas
investments and has served as a Director of Tatham Offshore since October 1996.
Mr. Pollock has been with Elliott Associates since 1989. Prior to joining
Elliott Associates, Mr. Pollock was employed by Greenleaf Partners, an
investment banking firm. Elliott Associates is deemed to beneficially own more
than 5% of the Common Stock of the Company. See "--Security Ownership of
Certain Beneficial Owners and Management."
ROGER B. VINCENT, SR., age 52, has served as a Director of Tatham
Offshore since January 1996. Mr. Vincent is President of Springwell
Corporation, a corporate finance advisory firm located in New York. Prior to
founding Springwell, Mr. Vincent spent 18 years with Bankers Trust Company
where he was a Managing Director of the firm as well as in charge of the firm's
Client Group. Mr. Vincent is a Trustee of the GCG Trust of the Golden American
Life Insurance Company and a member of the Policy Committee of Atlantic Asset
Management Partners, LLC. Mr. Vincent is a graduate of Yale University and
Harvard Business School.
DIANA J. WALTERS, age 34, has served as a Director of Tatham Offshore
since September 1995 and is a Vice President of PaineWebber, Inc. in their
energy group. Prior to joining PaineWebber, Ms. Walters served as Vice
President - Corporate Finance and Planning of Tatham Offshore from October 1993
through September 1995 and as Chief Financial Officer of Tatham Offshore from
September 1995 through November 1996. Prior to joining Tatham Offshore, she
served as a Vice President in the Natural Resources Group of Internationale
Nederlanden Bank (ING Bank) from 1990 to 1993 financing independent oil and gas
companies and as an Assistant Vice President in the Natural Resources
Department at The Chase Manhattan Bank (formerly Manufacturers Hanover Trust
Company) from 1986 to 1990 financing interstate and intrastate pipeline
companies. Ms. Walters received a B.A. degree and a M.A. degree in Energy and
Mineral Resources from the University of Texas at Austin.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held four meetings during the fiscal year ended
June 30, 1997. During the fiscal year ended June 30, 1997, each director
attended at least 75% of the total number of meetings of the Board of Directors
and the committees on which each such director served.
The Incentive Plan Compensation Committee is responsible for
administering the Equity Incentive Plan (the "Incentive Plan"). Pursuant to
the Incentive Plan, the Board of Directors appoints two or more directors to
the Incentive Plan Compensation Committee each of which is a disinterested
person within the meaning of Rule 16b(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and qualifies as an "outside director"
as such term is used for the purposes of Section 162(m) of the Internal Revenue
Code of 1986, as
3
<PAGE> 6
amended (the "Code"). The Incentive Plan Compensation Committee, which is
comprised of Messrs. Clarke, Nath and Vincent, held two meetings during the
fiscal year ended June 30, 1997.
The Conflicts and Audit Committee provides two primary services.
First, it advises the Board of Directors in matters regarding the system of
internal controls and the annual independent audit, and reviews policies and
practices of Tatham Offshore, including changes in accounting practices and
significant estimates made by management affecting the financial statements.
Second, the Conflicts and Audit Committee, at the request of the Board of
Directors, reviews specific matters as to which the Board of Directors believes
there may be a conflict of interest in order to determine if the resolution of
such potential conflict proposed by the Board of Directors is fair and
reasonable to Tatham Offshore. The Conflicts and Audit Committee also reviews
other matters that it deems appropriate. Any such matters approved by a
majority vote of the Conflicts and Audit Committee will be deemed conclusively
to be fair and reasonable to Tatham Offshore. The Conflicts and Audit
Committee of the Board of Directors, comprised of Messrs. Niven and Vincent and
Mr. Humbert B. Powell, III, met once during the fiscal year ended June 30, 1997.
The Special Committee is responsible for certain matters at the
request of the Board of Directors by resolution. The Special Committee is
comprised of Messrs. Clarke, Nath, Niven, Powell and Vincent. The Special
Committee did not meet during the fiscal year ended June 30, 1997.
Directors of Tatham Offshore are entitled to reimbursement for their
reasonable out-of-pocket expenses in connection with their travel to and from,
and attendance at, meetings of the Board of Directors or committees thereof.
Directors of Tatham Offshore who are not officers or affiliates of Tatham
Offshore are paid an annual fee of $30,000 plus $2,000 per meeting attended.
See "--Non-Employee Director Stock Option Plan."
Mr. Nath entered into a business consulting agreement with Flextrend
Development Company, L.L.C. ("Flextrend Development"), an affiliate of Tatham
Offshore, immediately after Flextrend Development acquired working interests in
certain offshore oil and gas leases from Tatham Offshore on June 30, 1995.
Pursuant to this agreement, Mr. Nath agreed to provide Flextrend Development
consulting services in exchange for a one-time consulting fee of $150,000. The
business consulting agreement had a one-year term commencing on the date of the
agreement (July 1, 1995). Through June 30, 1996, Mr. Nath abstained from
voting on matters that came before the Board of Directors of Tatham Offshore.
Effective July 1, 1996, Mr. Nath and Flextrend Development entered into a
similar agreement providing that Mr. Nath would devote 25% of his time to
Flextrend Development for an annual fee of $75,000 which was paid in January
1997.
In September 1996, Tatham Offshore entered into an agreement with Mr.
Pollock regarding his service as a Director of Tatham Offshore. The agreement
provides for standard director compensation including the grant pursuant to the
Non-Employee Director Stock Option Plan (the "Director Plan") of stock options
to purchase 30,000 shares of Common Stock at the fair market value on the date
of election as a director of Tatham Offshore. The stock options will vest at the
rate of 10,000 per year over three years.
In September 1996, Tatham Offshore entered into an agreement with Mr.
Donald S. Taylor regarding his service as a Director of Tatham Offshore. The
agreement provides for standard director compensation including the grant
pursuant to the Director Plan of stock options to purchase 30,000 shares of
Common Stock at the fair market value on the date of re-election as a director
of Tatham Offshore. The stock options will vest at the rate of 10,000 per year
over three years.
In September 1996, Tatham Offshore entered into an agreement with Ms.
Walters regarding her service as a Director of Tatham Offshore. The agreement
provides for standard director compensation including the grant pursuant to the
Director Plan of stock options to purchase 30,000 shares of Common Stock at the
fair market value on the date of re-election as a director of Tatham Offshore.
The stock options will vest at the rate of 10,000 per year over three years.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The executive officers of the Company are compensated by DeepTech and
do not receive compensation from the Company for their services as such except
for amounts that may be paid to such officers under the Incentive Plan. See
"--Incentive Plan" below. DeepTech has entered into management agreements with
each of its subsidiaries, including the Company, pursuant to which each
affiliate is charged an annual management fee in exchange for operational,
financial, accounting and administrative services. The management fee is
intended to reimburse DeepTech for the estimated costs of the services provided
to each affiliate. The management agreement was amended effective July 1, 1996
to provide for an annual management fee equal to 24% of DeepTech's overhead
expenses. During the year ended June 30, 1997, the Company was charged
$3,279,000 under its management agreement.
The following table sets forth the compensation paid by DeepTech to
the Company's Chief Executive Officer and each of the Company's five other most
highly compensated executive officers for the fiscal year ended June 30, 1997
(collectively, the "Named Officers"). The compensation set forth in the table
represents amounts paid to the Named Officers in respect to their services
rendered in all capacities to DeepTech and its subsidiaries for the fiscal
years ended June 30, 1997, 1996 and 1995. Therefore, the amounts shown do not
reflect amounts earned solely as compensation for services to the Company.
During the fiscal year ended June 30, 1997, each of Messrs. Tatham and Kunetka
spent less than a majority of his time performing services for the Company.
During the same period, Messrs. Gautreaux, Beeney, Gibbon and Lucas spent a
majority of their time performing services for the Company. As noted below, in
addition to serving as executive officers of the Company each of Messrs. Tatham
and Kunetka also served as officers of DeepTech and one or more of its
affiliates.
ANNUAL COMPENSATION BY DEEPTECH
<TABLE>
<CAPTION> LONG TERM
COMPENSATION
NAME/PRINCIPAL OTHER ANNUAL AWARDS ALL OTHER
POSITION WITH FISCAL SALARY(1) BONUS(1) COMPENSATION(2) OPTIONS COMPENSATION
TATHAM OFFSHORE YEAR ($) ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C> <C>
Thomas P. Tatham(3)...... 1997 $1,000,000(4) -- $1,400,000(4) --(5) --
Chief Executive Officer 1996 $2,731,750(6) $600,000(6) $ 39,179(7) 300,000(8)(11) --
1995 $600,000 $600,000(9) $ 107,714(10) 100,000(11) --
Antoine Gautreaux, Jr.(12) 1997 $200,000 -- -- 100,000(13) --
Chief Operating Officer 1996 $162,500 -- -- 75,000(11) --
1995 $31,248 -- -- 25,000(13) --
Dennis A. Kunetka(14).... 1997 $140,000 -- -- -- --
Senior Vice President- 1996 $120,000 -- -- 30,000(11) --
Corporate Finance & 1995 $120,000 $15,000 -- -- --
Investor Relations
Kenneth E. Beeney(12).... 1997 $140,000 -- -- 100,000(13) --
Vice President- 1996 $110,000 -- -- 75,000(11) --
Chief Geophysicist 1995 $90,000 $50,000 -- -- --
Edward J. Gibbon, Jr.(12). 1997 $125,000 -- -- 100,000(13) --
Vice President- 1996 $106,660 -- -- 50,000(11) --
Reservoir Engineering 1995 $100,000 $15,000 -- -- --
Jeffrey K. Lucas(12)...... 1997 $110,000 -- -- 70,000(13) --
Vice President- 1996 $95,000 -- -- 50,000(11) --
Land Manager 1995 $95,000 $50,000 -- -- --
</TABLE>
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(1) Includes the aggregate market value of Common Stock and DeepTech
common stock issued as a result of the exercise of options granted
pursuant to the Deferred Compensation Arrangement (as defined herein)
for salary and bonuses. The aggregate market value is calculated
based on the last reported sales prices of the Common Stock and/or the
DeepTech common stock on the dates of exercise of the options.
(2) Other Annual Compensation excludes the aggregate value of perquisites
when such value is less than the lesser of $50,000 or 10% of total
annual Salary and Bonus for each Named Officer.
(3) Mr. Tatham also serves as Chairman of the Board and Chief Executive
Officer of DeepTech and Chairman of the Board of Leviathan. During
the fiscal year ended June 30, 1997, Mr. Tatham spent less than a
majority of his time performing services for the Company.
(4) Effective July 1, 1996, the Compensation Committee of DeepTech's Board
of Directors established a compensation plan for Mr. Tatham for the
years ended June 30, 1997 and 1998. Under the compensation plan, Mr.
Tatham is to receive a base salary of $1,000,000 per annum plus
$1,400,000 per annum to be credited against incentive bonuses as they
are earned. The base salary and bonus are payable at the rate of
$200,000 per month. The Compensation Committee of DeepTech's Board of
Directors detailed certain performance goals for DeepTech and its
subsidiaries and affiliates, including the Company, and Mr. Tatham
which would allow him to earn the incentive bonus payments over the
two year period. The performance goals are structured to reward Mr.
Tatham for enhancing shareholder value through increased earnings per
share and by obtaining financing for key projects.
(5) Excludes options to acquire 1,100,000 shares of DeepTech common stock
that were granted to Mr. Tatham during the fiscal year ended June 30,
1997 related to matters other than for executive compensation and
unrelated to the operations of DeepTech or the Company.
(6) Mr. Tatham's salary and bonus for the fiscal year ended June 30, 1996
were settled through the issuance of options pursuant to the Deferred
Compensation Arrangement. Under the Deferred Compensation
Arrangement, for each $1 of salary deferred, Mr. Tatham was entitled
to apply $3 to the exercise price of options to acquire Common Stock
or DeepTech common stock under the Company's Incentive Plan or
DeepTech's equity incentive plan, respectively. Through June 30,
1996, Mr. Tatham had exercised options to acquire 600,125 shares of
DeepTech common stock in full settlement of his salary for the fiscal
year ended June 30, 1996. In addition, Mr. Tatham was awarded a bonus
during the fiscal year ended June 30, 1996 unrelated to the Company's
operations. This bonus was settled pursuant to the Deferred
Compensation Arrangement in September 1995 when Mr. Tatham exercised
options to purchase 150,000 shares of DeepTech common stock. The
aggregate market value of the 750,125 shares of DeepTech common stock
issued, calculated based on the last reported sales price on the dates
of exercise, was $3,331,750.
(7) Represents dues for club memberships.
(8) Excludes options to acquire 1,666,666 shares of DeepTech common stock
that were granted by DeepTech to Mr. Tatham during the fiscal year
ended June 30, 1996 related to matters other than for executive
compensation and unrelated to the operations of DeepTech or the
Company.
(9) Mr. Tatham's bonus was earned during the fiscal year ended June 30,
1995, but was deferred under the Deferred Compensation Arrangement
with DeepTech. In August 1995, Mr. Tatham exercised options to
purchase 150,000 shares of DeepTech common stock in settlement of this
bonus obligation. The market value of the 150,000 shares of DeepTech
common stock issued, calculated based on the last reported sales price
on the date of exercise, was $600,000.
(10) Includes $85,400 to pay the initial membership fee at two country
clubs.
(11) Options to acquire DeepTech common stock granted pursuant to
DeepTech's equity incentive plan.
(12) Each of these executive officers spent the majority of his time
performing services for the Company during the fiscal year ended June
30, 1997.
(13) Represents options issued to purchase shares of Common Stock pursuant
to the Company's Incentive Plan.
(14) Mr. Kunetka also serves as Senior Vice President - Corporate Finance
and Investor Relations for DeepTech and Leviathan. During the fiscal
year ended June 30, 1997, Mr. Kunetka spent less than a majority of
his time performing services for the Company.
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The following table sets forth certain information detailing Stock
Appreciation Rights ("SARs") grants made to the Named Officers under the
Incentive Plan with respect to shares of Tatham Offshore Common Stock during
the fiscal year ended June 30, 1997. Each of the SARs listed below were issued
pursuant to the Company's Incentive Plan.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF TATHAM OFFSHORE PERCENT OF
COMMON STOCK TOTAL
UNDERLYING OPTIONS/SARS EXERCISE POTENTIAL REALIZABLE VALUE
OPTIONS/SARS GRANTED IN OR BASE EXPIRATION AT ASSUMED ANNUAL RATES
NAME GRANTED FISCAL YEAR PRICE DATE OF STOCK PRICE APPRECIATION
($/SHARE) FOR OPTION TERM
5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Kenneth E. Beeney 100,000 12.7% $0.8125 10/21/02 $27,630 $62,690
Antoine Gautreaux, Jr. 100,000 12.7% $0.8125 10/21/02 $27,630 $62,690
Edward J. Gibbon, Jr. 100,000 12.7% $0.8125 10/21/02 $27,630 $62,690
Jeffrey K. Lucas 70,000 8.9% $0.8125 10/21/02 $19,341 $43,883
</TABLE>
OPTION EXERCISES AND YEAR-END VALUE TABLES
The following table sets forth certain information regarding the
outstanding options and warrants to purchase DeepTech common stock held by the
Named Officers at June 30, 1997:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED REALIZED AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)
NAME ON EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
Thomas P. Tatham 722,917(1) -- (2) 2,568,749 / -- $ 5,603,121 / --
Antoine Gautreaux, Jr. -- -- 18,750 / 56,250(3) $ 75,000 / $ 225,000
Dennis A. Kunetka -- -- 7,500 / 22,500(3) $ 30,000 / $ 90,000
Kenneth E. Beeney -- -- 18,750 / 56,250(3) $ 75,000 / $ 225,000
Edward J. Gibbon, Jr. -- -- 12,500 / 37,500(3) $ 50,000 / $ 150,000
Jeffrey K. Lucas -- -- 12,500 / 37,500(3) $ 50,000 / $ 150,000
</TABLE>
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(1) Options exercised to purchase DeepTech common stock were acquired by Mr.
Tatham related to matters other than executive compensation and unrelated
to the operations of DeepTech or the Company.
(2) On May 21, 1997, Mr. Tatham exercised 447,917 warrants to purchase a like
amount of shares of DeepTech common stock at $4.50 per share. In addition,
Mr. Tatham exercised 275,000 warrants to purchase a like amount of shares
of DeepTech common stock at $10.00 per share. On May 21, 1997, DeepTech
common stock closed at $6.44 per share on The Nasdaq National Market.
(3) Represents unvested portion of options issued pursuant to DeepTech's equity
incentive plan and which vest 25% annually beginning November 14, 1996.
7
<PAGE> 10
The following table sets forth certain information regarding the
outstanding options and warrants to purchase Tatham Offshore Common Stock held
by the Named Officers at June 30, 1997.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
VALUE UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED REALIZED AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)
NAME ON EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C> <<C>
Antoine Gautreaux, Jr. -- -- 25,000(1)/100,000(2) -- / --
Kenneth E. Beeney -- -- -- /100,000(2) -- / --
Edward J. Gibbon, Jr. -- -- -- /100,000(2) -- / --
Jeffrey K. Lucas -- -- -- / 70,000(2) -- / --
</TABLE>
- -----------------------------
(1) Options granted pursuant to Tatham Offshore's Incentive Plan which are 100%
vested.
(2) SARs granted pursuant to Tatham Offshore's Incentive Plan on October 21,
1996 which vest 1/3 each year beginning three years from the date of grant.
INCENTIVE PLAN
In 1995, Tatham Offshore adopted the Incentive Plan. The Incentive
Plan was effected to provide Tatham Offshore with the ability of making a
variety of awards pursuant to the Incentive Plan including stock options,
restricted stock and stock value equivalent awards.
Under the Incentive Plan, Tatham Offshore may grant to employees,
consultants or agents of Tatham Offshore or any of its parents or subsidiaries
one or more options (each, a "Stock Option") to purchase shares of Common Stock
as hereinafter set forth. Stock Options granted under the Incentive Plan may
be either incentive stock options ("Incentive Stock Options") within the
meaning of Section 422(b) of the Code, or options that do not qualify as
Incentive Stock Options ("Non-Qualified Stock Options"). Pursuant to the
Incentive Plan, Tatham Offshore may grant awards of Common Stock subject to
restrictions on sale or other disposition of such shares ("Restricted Stock
Grant"), and such other requirements as the Incentive Plan Compensation
Committee deems appropriate including the requirement that such shares be
forfeited upon termination of employment for certain reasons within a specified
period of time. Pursuant to the Incentive Plan, Tatham Offshore may also grant
rights to receive an amount equal to the fair market value of shares of Common
Stock or rights to receive an amount equal to any appreciation or increase in
the fair market value of Common Stock over a specified period of time (SARs).
Stock Options, Restricted Stock Grants and SARs are referred to collectively
herein as "Awards."
Except with respect to outstanding Awards, and unless sooner
terminated by action of Tatham Offshore's Board of Directors or the committee
thereof charged with administration of the Incentive Plan, the Incentive Plan
will terminate on December 31, 2005. The maximum number of shares of Common
Stock with respect to which Awards may be granted under the Incentive Plan is
4,000,000, subject to adjustments for stock splits, stock dividends and certain
other changes in capitalization.
The Board of Directors may terminate or suspend the Incentive Plan (or
any portion thereof) at any time with respect to any shares for which Awards
have not previously been granted and remain outstanding. The Board of
Directors has the right to alter or amend the Incentive Plan or any part
thereof from time to time; provided, however, that no change in any Award
theretofore granted may be made which would materially adversely affect the
rights and obligations of the holder of any such Award without the written
consent of such Incentive Plan participant; and provided, further, that the
Board of Directors may not, without stockholder approval as required under the
Incentive Plan, (i) materially increase the number of shares of Common Stock
which may be issued under the Incentive Plan (other than in connection with
adjustments permitted by the Incentive Plan), (ii) materially modify the
requirements as to eligibility for participation in the Incentive Plan,
8
<PAGE> 11
(iii) materially increase the benefits accruing to participants under the
Incentive Plan, or (iv) extend the termination date of the Incentive Plan. In
addition, no amendment, suspension or termination can be adopted which would
disqualify the Incentive Plan from (i) the exemption provided by Rule 16b-3,
promulgated under the Exchange Act, or any successor rule or regulation to such
Rule 16b-3, as such rule is applicable from time to time, or (ii) the benefits
provided under Section 422 of the Code, or any successor thereto.
The Incentive Plan is not subject to any provisions of the Employee
Retirement Income Security Act of 1974, as amended, or the qualification
requirements of Section 401 of the Code.
The Incentive Plan is to be administered by the Incentive Plan
Compensation Committee. Each member of the Incentive Plan Compensation
Committee is a disinterested person within the meaning of Rule 16b-3 of the
Exchange Act and qualifies as an "outside director", as such term is used for
the purposes of Section 162(m) of the Code and any rules and regulations
promulgated thereunder.
Subject to the provisions of the Incentive Plan, the Incentive Plan
Compensation Committee has sole authority to select the individuals who are to
be granted Awards from among those persons who are eligible and to determine
the restrictions, terms and conditions of each Award granted under the
Incentive Plan (subject to the terms of the Incentive Plan). The Incentive
Plan Compensation Committee is authorized to interpret the Incentive Plan and
may, from time to time, adopt, amend or rescind rules and regulations relating
to the implementation, administration and maintenance of the Incentive Plan.
A total of 815,000 Awards issued pursuant to the Incentive Plan are
currently outstanding.
DIRECTOR PLAN
In 1995, Tatham Offshore adopted the Director Plan. The purpose of
the Director Plan is to allow Tatham Offshore to attract the best available
individuals to serve as outside directors of Tatham Offshore.
All non-employee directors of Tatham Offshore are eligible to
participate in the Director Plan. The Director Plan provides for both
automatic one time grants of Stock Options to Tatham Offshore's non-employee
directors and for the issuance and exercise of Stock Options in lieu of
standard cash director compensation upon the election of non-employee
directors. All Stock Options granted under the Director Plan are Non-Qualified
Stock Options.
Except with respect to outstanding Stock Options, and unless sooner
terminated by action of the Board of Directors, the Director Plan will
terminate on December 31, 2005. The maximum number of shares of Common Stock
with respect to which Stock Options may be granted under the Director Plan is
1,000,000, subject to adjustments for stock splits, stock dividends and certain
other changes in capitalization.
Under the Director Plan, grants of Stock Options to purchase 30,000
shares of Common Stock were automatically made to all non-employee directors of
Tatham Offshore provided that such non-employee directors had not already
received stock options to purchase 30,000 shares of Common Stock in connection
with their service as a director of Tatham Offshore. In addition, after the
effective date of the Director Plan, any newly elected non-employee director
will automatically receive Stock Options to purchase 30,000 shares of Common
Stock. The exercise price for the Stock Options to purchase 30,000 shares of
Common Stock will be 100% of the fair market value of the Common Stock on the
later to occur of (i) the effectiveness of the Director Plan, or (ii) the
election of a participant as a Director of Tatham Offshore. The Stock Options
issued pursuant to these provisions can be immediately exercisable and, unless
terminated sooner in accordance with the Director Plan, shall expire on a date
which is ten (10) years after the date of grant of the option.
In connection with their agreements to serve on the Board of
Directors, each of Messrs. Niven and Powell were originally granted stock
options to purchase 30,000 shares of Common Stock of Tatham Offshore at $10.00
per share, the initial public offering price. Each of these stock options
vested at the rate of 10,000 per
9
<PAGE> 12
year beginning June 30, 1995 and were subject to shareholder approval. During
the year ended June 30, 1996, these stock options were canceled and Messrs.
Niven and Powell were granted Stock Options to purchase 30,000 shares of Common
Stock at $0.8125 per share pursuant to the Director Plan which included 10,000
Stock Options each, which vested immediately, and 10,000 Stock Options each,
which vested annually on June 30, 1996 and 1997. In connection with his
appointment to the Board, Mr. Vincent was issued Stock Options to purchase
30,000 shares of Common Stock at $.8125 per share pursuant to the Director
Plan. These Stock Options vest at the rate of 10,000 per year beginning
January 31, 1997.
In connection with his election to the Board of Directors in October
1996, Mr. Pollock was issued Stock Options to purchase 30,000 shares of Common
Stock at $0.8125 per share. In their new roles as non-employee directors on
the Board of Directors, in October 1996, Mr. Taylor and Ms. Walters were each
issued Stock Options to purchase 30,000 shares of Common Stock at $0.8125 per
share. The Stock Options issued to Messrs. Pollock and Taylor and Ms. Walters
vest at the rate of 10,000 per year beginning October 21, 1997.
The Board of Directors may terminate or suspend the Director Plan (or any
portion thereof) at any time with respect to any shares for which Stock Options
have not previously been granted and remain outstanding. The Board of
Directors has the right to alter or amend the Director Plan or any part thereof
from time to time; provided, however, that no change in any Stock Option
theretofore granted may be made which would materially adversely affect the
rights and obligations of the holder of any such Stock Option without the
written consent of such Director Plan participant; and provided, further, that
the Board of Directors may not, without stockholder approval as required under
the Director Plan, (i) materially increase the number of shares of Common Stock
which may be issued under the Director Plan (other than in connection with
adjustments permitted by the Director Plan), (ii) materially modify the
requirements as to eligibility for participation in the Director Plan, (iii)
materially increase the benefits accruing to participants under the Director
Plan, or (iv) extend the termination date of the Director Plan. In addition,
no amendment, suspension or termination may be adopted which would disqualify
the Director Plan from (i) the exemption provided by Rule 16b-3, promulgated
under the Exchange Act, or any successor rule or regulation to such Rule 16b-3,
as such rule is applicable from time to time, or (ii) the benefits provided
under Section 422 of the Code, or any successor thereto.
10
<PAGE> 13
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of August 15, 1997, the beneficial
ownership of the outstanding Common Stock of Tatham Offshore by (i) each person
who is known to Tatham Offshore to beneficially own more than 5% of the
outstanding Common Stock of Tatham Offshore, (ii) each director and director
nominee of Tatham Offshore and (iii) all executive officers and directors of
Tatham Offshore as a group. The following table also sets forth, as of August
15, 1997, the beneficial ownership of the common stock of DeepTech by (i) each
director and director nominee of Tatham Offshore and (ii) executive officers
and directors of Tatham Offshore as a group.
<TABLE>
<CAPTION>
SHARES OF CLASS BENEFICIALLY OWNED(1)
------------------------------------
TATHAM OFFSHORE DEEPTECH
COMMON STOCK(2)(3) COMMON STOCK
------------------ ------------
NUMBER PERCENT NUMBER PERCENT
------- ------ ------- -------
<S> <C> <C> <C> <C>
Kenneth E. Beeney................... 85,000 * 35,829 *
Phillip G. Clarke................... 63,786 * 172,260 (4) *
Antoine Gautreaux, Jr............... 25,000 (5) * 19,390 *
E. Lynn Hill........................ -- * 221 *
Edward L. Moses, Jr.,............... 920,297 (6) 3.3% 98,116 (7) *
Clyde E. Nath....................... 84,582 (8) * 30,000 (9) *
James G. Niven...................... 93,786 (10) * -- --
Jonathan D. Pollack................. -- (11) * -- --
Humbert B. Powell, III............. 86,780 (10) * 11,988 *
Thomas P. Tatham.................... 5,755,785 (12) 18.4% 9,926,431 (13) 44.1%
7500 Texas Commerce Tower
Houston, Texas 77002
Donald S. Taylor.................... 913,370 3.3% 994,027 (14) 5.0%
3803 Pleasant Valley Drive
Missouri City, Texas 77459
Roger B. Vincent Sr................. 13,573 (15) * 55,263 (16) *
Diana J. Walters.................... 25,000 * 3,000 *
DeepTech International Inc.......... 28,811,214 (17) 62.4% -- --
7500 Texas Commerce Tower
Houston, Texas 77002
Elliott Associates, L.P............ 15,533,407 (18) 36.2% -- --
712 5th Avenue, 36th Floor
New York, New York 10019
Martley International, L.P........... 15,533,407 (18) 36.2% -- --
1086 Teaneck Road
Teaneck, New Jersey 07666
Westgate International, L.P.......... 15,533,407 (18) 36.2% -- --
c/o Midland Bank Trust
Corporation (Cayman) Limited
P.O. Box 1109, Mary Street
Grand Cayman, Cayman Island
British West Indies
Executive officers and directors 8,499,625 (19) 26.3% 11,420,239 (20) 50.0%
as a group (17 persons)...........
</TABLE>
- --------------
Less than 1%.
11
<PAGE> 14
(1) Shares of Common Stock that are not outstanding but that may be
acquired by a person upon exercise of options or warrants within 60
days of the above date are deemed outstanding for the purpose of
computing the percentage of outstanding shares beneficially owned by
such person. However, such shares are not deemed to be outstanding
for the purpose of computing the percentage of outstanding shares
beneficially owned by any other person.
(2) Shares of Series A 12% Convertible Exchangeable Preferred Stock
("Series A Preferred Stock"), Series B 8% Convertible Exchangeable
Preferred Stock ("Series B Preferred Stock") and Series C 4%
Convertible Exchangeable Preferred Stock ("Series C Preferred Stock")
held by each named person are assumed converted into shares of Common
Stock for the purpose of computing the number of shares of Common
Stock beneficially owned by such person. Alternatively, each share of
Series A, B and C Preferred Stock may be exchanged for four exchange
warrants which are each exercisable to purchase one share of Common
Stock at $0.653 per share. See "--Certain Relationships and Related
Transactions--Convertible Exchangeable Preferred Stock."
(3) Excludes each named person's indirect ownership interest, if any, in
the 28,811,214 shares of Tatham Offshore beneficially owned by
DeepTech.
(4) Includes options to purchase 150,000 shares of DeepTech common stock.
In addition, Mr. Clarke owns 2,000 preference units of Leviathan Gas
Pipeline Partners, L.P. (the "Partnership").
(5) Includes options to purchase 25,000 shares of Common Stock.
(6) Includes 656,296 shares assumed acquired as a result of conversion of
255,100 shares of Series A Preferred Stock into Common Stock.
(7) Includes options to acquire 18,750 shares of DeepTech common stock.
Does not include 100,000 shares of restricted stock of DeepTech.
(8) Includes options to purchase 30,000 shares of Common Stock. In
addition, Mr. Nath owns 1,000 preference units of the Partnership.
(9) Includes options to purchase 30,000 shares of DeepTech common stock.
(10) Includes options to purchase 30,000 shares of Common Stock.
(11) Mr. Pollock is Portfolio Manager of Elliott Associates whose
beneficial ownership of securities is shown elsewhere in this table.
See footnote 18.
(12) Includes 3,955,784 shares assumed acquired as a result of conversion
of 1,537,600 shares of Series A Preferred Stock into Common Stock.
Also includes 16,401 shares assumed acquired as a result of conversion
of 21,000 shares of Series C Preferred Stock into Common Stock. Mr.
Tatham owns 8.6% of the Series A Preferred Stock outstanding.
(13) Includes options to purchase 2,568,749 shares of DeepTech common
stock.
(14) Includes 689,086 shares of DeepTech common stock held by Dover Energy,
Inc. Mr. Taylor owns 1/3 of Dover Energy, Inc. Mr. Taylor disclaims
ownership of 459,390 shares.
(15) Includes 2,573 shares assumed acquired as a result of conversion of
1,000 shares of Series A Preferred Stock, which is less than 1% of the
Series A Preferred Stock outstanding, into Common Stock. Also
includes options to purchase 10,000 shares of Common Stock. In
addition, Mr. Vincent owns 2,000 preference units of the Partnership.
12
<PAGE> 15
(16) Includes 25,111 options to acquire shares of DeepTech common stock.
(17) Includes 6,000,000 shares of Common Stock which DeepTech has the right
to acquire in connection with certain conversion rights relating to
Tatham Offshore's $60,000,000 aggregate principal amount of
Subordinated Convertible Promissory Notes (the "Subordinated Notes")
payable to DeepTech. See "--Certain Relationships and Related
Transactions--Subordinated Notes Restructuring Option Agreement" and
Item 3 "--Ratification of Restructuring Option Agreement". Also
includes 12,016,971 shares of Common Stock assumed acquired as a result
of conversion of 4,670,957 shares of Series A Preferred Stock. Also
includes 794,243 shares of Common Stock assumed acquired as a result of
conversion of 1,016,957 shares of Series C Preferred Stock. DeepTech
beneficially owns 26.0% of the Series A Preferred Stock outstanding and
76.0% of the Series C Preferred Stock outstanding.
(18) The total number of shares credited to each of Elliott Associates, a
Delaware limited partnership, Westgate International, L.P., a Cayman
Islands Limited Partnership ("Westgate") and Martley International,
Inc., a Delaware corporation ("Martley") as beneficial ownership
interest includes (a) 13,346,826 shares beneficially owned by Elliott
Associates ("Elliott Shares") and (b) 2,186,830 shares beneficially
owned by Westgate ("Westgate Shares"). The Westgate Shares are
credited to Martley because Westgate and Martley share the power to
vote, direct the vote of, and to dispose or direct the disposition of
the Westgate Shares. The Westgate Shares are credited to Elliott
Associates, the Elliott Shares credited to Westgate, and the Elliott
Shares credited to Martley as a result of Elliott Associates, Martley
and Westgate's actions as a shareholder group under Rule 13D-3 of the
Exchange Act. The Elliott Shares include 13,346,826 shares that may
be acquired by Elliott Associates by conversion of 5,187,784 shares of
Series A Preferred Stock owned by Elliott Associates into Common
Stock; the Westgate Shares include 2,186,830 shares of Common Stock
that may be acquired by Westgate as a result of the conversion of
850,000 shares of Series A Preferred Stock owned by Westgate into
Common Stock. Each of Elliott Associates, Westgate and Martley
beneficially owns 33.7% of the Series A Preferred Stock outstanding.
(19) Includes 4,894,625 shares of Common Stock assumed acquired as a result
of conversion of 1,854,000 shares of Series A Preferred Stock. Also
includes 16,562 shares of Common Stock assumed acquired as a result of
conversion of 21,000 shares of Series C Preferred Stock. Also
includes options to purchase 125,000 shares of Common Stock. The
executive officers and directors as a group beneficially own 10.3% of
the Series A Preferred Stock outstanding.
(20) Includes options to purchase 2,869,110 shares of DeepTech common
stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a summary of certain agreements, arrangements and
transactions between or among Tatham Offshore and certain related parties,
including DeepTech and its affiliates. It is Tatham Offshore's policy to enter
into transactions with related parties on terms that, on the whole, are no less
favorable than those that would be available from unaffiliated parties. Based
on Tatham Offshore's experience in the industry and the terms of its
transactions with unaffiliated parties, it is Tatham Offshore's belief that all
of the transactions described below involving Tatham Offshore met that standard
at the time such transactions were effected.
Unless the context otherwise requires, references in this Proxy
Statement to "DeepTech" shall mean DeepTech International Inc., a Delaware
corporation. DeepTech, a diversified energy company, conducts its operations
through its operating subsidiaries which, as of June 30, 1997, primarily
included Leviathan (indirectly 85%-owned), Tatham Offshore (36.6%-owned),
DeepFlex Production Services, Inc. (100%-owned) ("DeepFlex"), Offshore Gas
Marketing, Inc. (80%-owned) ("Offshore Marketing") and Offshore Gas Processors,
Inc. (85%-owned), and their respective subsidiaries. Leviathan is the general
partner of the Partnership, in which DeepTech owns an indirect 23.2% effective
interest.
13
<PAGE> 16
Management Agreement
The management agreement between Tatham Offshore and DeepTech provides
for an annual management fee which is intended to reimburse DeepTech for the
estimated costs of its operational, financial, accounting and administrative
services provided to Tatham Offshore. Effective July 1, 1996, Tatham Offshore
amended its management agreement with DeepTech to provide for an annual
management fee of 24% of DeepTech's overhead expenses. During the year ended
June 30, 1997, DeepTech charged Tatham Offshore $3,279,000 under the management
agreement.
Subordinated Notes Restructuring Option Agreement
DeepTech currently holds the Company's Subordinated Notes with an
aggregate principal amount of $60.0 million. Through June 30, 1997, the
Subordinated Notes bore interest at a rate of 11 3/4% per annum, payable
quarterly. During the year ended June 30, 1997, Tatham Offshore paid $7.1
million in interest to DeepTech under the notes. Effective July 1, 1997, the
interest rate under the Subordinated Notes increased to 13% per annum. Under
the terms of the Subordinated Notes, the principal amount of the notes was
payable in seven equal annual installments beginning August 1, 1999.
In September 1997, DeepTech and Tatham Offshore entered into an option
agreement to restructure the Subordinated Notes (the "Restructuring Option
Agreement"). Under the Restructuring Option Agreement, DeepTech has agreed to
forgive the next two scheduled interest payments under the Subordinated Notes,
a total of $3.9 million. In exchange, DeepTech received several options from
Tatham Offshore and has agreed to restructure the Subordinated Notes by
consummating one of the following transactions: (i) to convert all of the
principal amount outstanding under the Subordinated Notes into shares of Common
Stock at the market price at the time the option is exercised; (ii) to purchase
shares of 6% Senior Preferred Stock of Tatham Offshore with a liquidation
preference value of $60 million, the proceeds from which would be used to
prepay the outstanding balance of the Subordinated Notes; or (iii) to purchase
all of the outstanding capital stock of Tatham Offshore Development Company,
Inc. ("Tatham Offshore Development"), a wholly-owned subsidiary of Tatham
Offshore, for $60 million, the proceeds from which would be used to prepay the
outstanding balance of the Subordinated Notes. DeepTech is required to select
one of the above restructuring transactions on or before December 31, 1997. As
a result, the Company will no longer be obligated to make interest or principal
payments under the Subordinated Notes. Additionally, the Company believes that
by consummating one of the above restructuring transactions that it will be
able to continue to maintain its listing on The Nasdaq National Market.
Tatham Offshore Development holds the leasehold interests on Ewing
Bank Blocks 958, 959, 1002 and 1003, the Sunday Silence Project. Under the
Restructuring Option Agreement, Tatham Offshore has the right to pursue the
sale, farmout or other disposition of the Sunday Silence Project during the
option period. In the event that Tatham Offshore enters into a sales agreement
for 100% of Tatham Offshore Development or the Sunday Silence Project prior to
the expiration of the option period, DeepTech has the further option to receive
50% of the cash proceeds from such transaction as a prepayment of the
Subordinated Notes. If DeepTech elects this option, DeepTech has agreed to
convert the remaining principal amount of the Subordinated Notes into Common
Stock at the market price. For purposes of determining the market price of
Common Stock under this agreement, the parties have agreed the market price
shall be the average of the closing prices for the ten trading days immediately
preceding the exercise date of the option. DeepTech's option to acquire Tatham
Offshore Development also includes all of Tatham Offshore's interest in a
drilling arrangement with Sedco Forex Division of Schlumberger Technology
Corporation ("Sedco Forex") for the use of a semisubmersible drilling rig in
the Gulf of Mexico. Tatham Offshore has agreed not to sell less than 100% of
its interest in Tatham Offshore Development pending the exercise by DeepTech of
one of its options. See Item 3 "--Ratification of Restructuring Option
Agreement".
14
<PAGE> 17
Marketing Agreements
Tatham Offshore and Offshore Marketing have entered into purchase
agreements whereby Offshore Marketing has agreed to purchase all of the gas,
oil and condensate produced by Tatham Offshore from its properties on a month
to month basis. During the year ended June 30, 1997, the Company sold 99% of
its production to Offshore Marketing. The agreement with Offshore Marketing
provides Offshore Marketing fees equal to 2% of the sales value of crude oil
and condensate and $0.015 per dekatherm of natural gas for selling Tatham
Offshore's production. Tatham Offshore's sales to Offshore Marketing totaled
$20,543,000 for the year ended June 30, 1997.
Convertible Exchangeable Preferred Stock
As of July 1, 1996, DeepFlex owned 4,670,957 shares of Tatham
Offshore's Series A Preferred Stock and 5,329,043 warrants of Tatham Offshore.
In December 1996, DeepFlex exercised 1,016,957 of its Tatham Offshore warrants
to acquire an equal number of shares of Tatham Offshore's Series C Preferred
Stock at $1.00 per share. The remaining 4,312,086 warrants of Tatham Offshore
held by DeepFlex were automatically converted into an equal number of shares of
Tatham Offshore's Mandatory Redeemable Preferred Stock on January 1, 1997. At
any time until December 31, 1998, each share of Tatham Offshore's Series A and
C Preferred Stock held by DeepFlex may be exchanged for four warrants (the
"Exchange Warrants") each of which entitles DeepFlex to purchase one share of
Common Stock at a price equal to $0.653 per share. The Exchange Warrants
expire July 1, 1999. Alternatively, at any time, DeepFlex may convert the
liquidation value of its Tatham Offshore Series A and C Preferred Stock and
accrued and unpaid dividends into shares of Common Stock at $0.653 per share.
Tatham Offshore is required to redeem its Mandatory Redeemable Preferred Stock
at a redemption price of $0.50 per share if it redeems any shares of its Series
A, B or C Preferred Stock. Tatham Offshore is also required to redeem its
Mandatory Redeemable Preferred Stock at a redemption price of $0.50 per share
from net proceeds from the sale of Common Stock pursuant to the exercise of
Exchange Warrants, subject to certain conditions. After July 1, 1997, Tatham
Offshore's Series A and C Preferred Stock and its Mandatory Redeemable
Preferred Stock held by DeepFlex is redeemable at the option of Tatham
Offshore.
Purchase and Sale Agreement
On June 30, 1995, Flextrend Development, a subsidiary of the Partnership,
entered into a purchase and sale agreement with Tatham Offshore pursuant to
which Flextrend Development acquired, subject to certain reversionary
interests, a 75% working interest in Viosca Knoll Block 817, a 50% working
interest in Garden Banks Block 72 and a 50% working interest in Garden Banks
Block 117 (the "Assigned Properties") from Tatham Offshore for $30,000,000.
Flextrend Development is entitled to retain all of the revenue attributable to
the Assigned Properties until it has received net revenue equal to the Payout
Amount (as defined below), whereupon Tatham Offshore is entitled to receive a
reassignment of the Assigned Properties, subject to reduction and conditions as
discussed below. "Payout Amount" is defined as an amount equal to all costs
incurred by Flextrend Development with respect to the Assigned Properties
(including the $30,000,000 paid to Tatham Offshore) plus interest thereon at a
rate of 15% per annum. Effective February 1, 1996, the Partnership entered
into an agreement with Tatham Offshore regarding certain transportation
agreements that increased the amount recoverable from the Payout Amount by
$7,500,000 plus interest.
Effective December 10, 1996, Flextrend Development exercised its
option to permanently retain 50% of the acquired working interest in the
Assigned Properties in exchange for forgiving 50% of the then-existing Payout
Amount exclusive of the $7,500,000 plus interest added to the Payout Amount in
connection with the restructuring of certain transportation agreements
discussed above. Flextrend Development remains obligated to fund any further
development costs attributable to Tatham Offshore's portion of the working
interests, such costs to be added to the Payout Amount. Flextrend
Development's election to retain 50% of the acquired working interest in the
Assigned Properties reduced the Payout Amount from $94,020,000 to $50,760,000.
Subsequent to December 10, 1996, only 50% of the development and operating
costs attributable to the Assigned Properties are added to the Payout Amount
and 50% of the net revenue from the Assigned Properties will reduce the Payout
Amount. As of June 30, 1997, the Payout Amount totaled $45,918,000. The
Company has determined that
15
<PAGE> 18
given the current estimates of commodity prices and proved reserves, the
possibility that the designated revenue from the Assigned Properties will be
sufficient to satisfy the Payout Amount is remote.
Transportation, Processing and Platform Access Agreements
General. Tatham Offshore entered into transportation, processing and
platform access agreements with the Partnership pursuant to a Master Gas
Dedication Agreement in which Tatham Offshore dedicated all production from its
Garden Banks, Viosca Knoll, Ewing Bank and Ship Shoal leases as well as certain
adjoining areas of mutual interest to the Partnership for transportation. In
exchange, the Partnership agreed to install the pipeline facilities necessary
to transport production from the areas and certain related facilities and to
provide transportation services with respect to such production. These
agreements are generally in effect for the productive life of the reserves.
Tatham Offshore agreed to pay certain fees for transportation services and
facilities access provided under the Master Gas Dedication Agreement. Pursuant
to the terms of the Purchase and Sale Agreement, Flextrend Development assumed
all of Tatham Offshore's obligations under the Master Gas Dedication Agreement
and certain ancillary agreements with respect to the Assigned Properties.
Viosca Knoll. The Partnership charged Tatham Offshore $1,995,000 for
the year ended June 30, 1997 for commodity and platform access fees associated
with the Viosca Knoll 817 lease in accordance with certain agreements under the
Master Gas Dedication Agreement. Commodity charges are based on the volume of
oil and gas transported or processed.
Ewing Bank. The transportation agreements with respect to the Ewing
Bank properties provided for a monthly demand charge and a commodity charge
equal to 4% of the market price for production actually transported. For the
year ended June 30, 1997, charges under these agreements with the Partnership
totaled $1,493,000. In May 1997, Tatham Offshore shut-in the Ewing Bank 914 #2
well as a result of a downhole mechanical problem.
Ship Shoal. The transportation agreements related to the Ship Shoal
Block 331 also provided for demand and commodity charges which totaled $638,000
for the year ended June 30, 1997. Completion problems related to three
wellbores at Ship Shoal Block 331 resulted in minimal production from the
property and as a result, Tatham Offshore has decided not to pursue further
recompletion operations at this time.
Dover Services Agreement
Effective November 1, 1995, Dover Technology, Inc. ("Dover"), an affiliate
of DeepTech, entered into a Technology Services Agreement with Tatham Offshore
(the "Dover Services Agreement") which expired on October 31, 1996. Under the
Dover Services Agreement, Dover provided development and exploration services
to Tatham Offshore, which services included, without limitation, 2-D and 3-D
seismic interpretation, reserve quantification and evaluation, prospect
generation, log analyses, mapping and technical presentations, and structural
modeling utilizing CAEX technology with reasonable access to DeepTech's
equipment. For the year ended June 30, 1997, charges for technical services by
Dover to Tatham Offshore under the Dover Services Agreement totaled $160,000.
Tatham Offshore's payable to Dover for these services in the amount of
$1,734,000 at November 1, 1995 was converted into the Affiliate Note as
discussed below. Mr. Taylor, a director of Tatham Offshore, owns a one-third
interest in Dover Energy, Inc. which owns 50% of Dover.
Affiliate Note
On November 1, 1995, Tatham Offshore converted $1,734,000 of its accounts
payable to Dover into an unsecured promissory note payable to DeepTech (the
"Affiliate Note"). The Affiliate Note bore interest at 14.5% per annum,
payable quarterly, and the principal was payable to DeepTech in six monthly
installments which began on January 31, 1997. Interest expense related to the
Affiliate Note totaled $202,000 for the year ended June 30, 1997.
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Other
In September 1995, Tatham Offshore reacquired an aggregate 25% working
interest in Viosca Knoll Block 817 and an approximate 12.5% working interest in
the remainder of the Viosca Knoll Blocks 772/773, 774, 818 and 861
(collectively, the "Viosca Knoll Properties") from two industry partners for a
total of $16,000,000 in convertible production payments payable from 25% of the
net cash flow from the Viosca Knoll Properties so acquired. The unpaid portion
of the production payments is convertible into Common Stock at any time during
the first five years at $8.00 per share. Under certain circumstances, the
industry partners may require DeepTech to purchase the convertible production
payments for an amount equal to 50% of the unrecovered portion thereof. At
June 30, 1997, the unpaid portion of the production payment obligation totaled
$12,535,000.
SECTION 16 (a) REPORTS
Section 16(a) of the Exchange Act requires Tatham Offshore's officers
and directors, and persons who beneficially own more than 10% of Common Stock
("10% Stockholders"), to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("the Commission"). Based solely
upon a review of the Forms 3, 4 and 5 and amendments thereto, and certain
written representations furnished to the Company, the Company believes that,
during the fiscal year ended June 30, 1997, its executive officers, directors
and greater than 10% beneficial owners complied with all applicable filing
requirements, except that Donald S. Taylor and Roger B. Vincent, Sr. detected
certain possible deficiencies in their reporting to the Commission. In order
to correct such possible deficiencies, Donald S. Taylor and Roger B. Vincent,
Sr. each filed a Statement of Changes in Beneficial Ownership of Securities on
Form 4 covering four transactions for Donald S. Taylor and one transaction for
Roger B. Vincent, Sr.
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COMPARATIVE STOCK PERFORMANCE
As required by applicable rules of the Commission, the performance
graph was prepared based upon the following assumptions:
1. $100 was invested in Common Stock, the Standard & Poor's 500 Stock
Index (the "S&P 500 Index") and the Dow Jones Oil -- Secondary
Index (the "Peer Group") on February 9, 1994 (the date the Common
Stock commenced trading on The Nasdaq National Market).
2. Dividends are reinvested on the ex-dividend dates.
COMPARATIVE TOTAL RETURNS
TATHAM OFFSHORE, INC., THE S&P 500 INDEX AND THE PEER GROUP
(Performance Results February 9, 1994 to June 30, 1997)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
9-FEB-94 30-JUN-94 30-JUN-95 30-JUN-96 30-JUN-97
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TATHAM OFFSHORE 100.00 153.75 35.00 8.75 5.67
----------------------------------------------------------------------------------------------
S&P 500 INDEX 100.00 94.90 119.64 150.75 203.05
----------------------------------------------------------------------------------------------
PEER GROUP 100.00 98.41 101.25 117.38 126.76
----------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 21
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(ITEM 2)
Pursuant to the recommendation of the Conflicts and Audit Committee,
the Board of Directors has appointed Price Waterhouse LLP, independent
accountants, to audit the consolidated financial statements of Tatham Offshore
for the year ending June 30, 1998. Tatham Offshore is advised that no member
of Price Waterhouse LLP has any direct financial interest or material indirect
financial interest in Tatham Offshore or any of its subsidiaries or, during the
past three years, has had any connection with Tatham Offshore or any of its
subsidiaries in the capacity of promoter, underwriter, voting trustee,
director, officer or employee.
Ratification of this appointment shall be effective upon receiving the
affirmative vote of the holders of a majority of the Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting. Under
Delaware law, an abstention would have the same legal effect as a vote against
this proposal, but a broker non-vote would not be counted for purposes of
determining whether a majority had been achieved. The Board of Directors
recommends voting "FOR" ratification by the stockholders of this appointment.
A representative of Price Waterhouse LLP is expected to be present at
the Annual Meeting and will be available to respond to appropriate questions.
RATIFICATION OF RESTRUCTURING OPTION AGREEMENT
(ITEM 3)
Restructuring of Subordinated Notes. DeepTech currently holds the
Company's Subordinated Notes with an aggregate principal amount of $60.0
million. Through June 30, 1997, the Subordinated Notes bore interest at a rate
of 11 3/4% per annum, payable quarterly. During the year ended June 30, 1997,
Tatham Offshore paid $7.1 million in interest to DeepTech under the notes.
Effective July 1, 1997, the interest rate under the Subordinated Notes
increased to 13% per annum. Under the terms of the Subordinated Notes, the
principal amount of the notes was payable in seven equal annual installments
beginning August 1, 1999.
In September 1997, DeepTech and Tatham Offshore entered into the
Restructuring Option Agreement. Under the Restructuring Option Agreement,
DeepTech has agreed to forgive the next two scheduled interest payments under
the Subordinated Notes, a total of $3.9 million. In exchange, DeepTech
received several options from Tatham Offshore and has agreed to restructure the
Subordinated Notes by consummating one of the following transactions: (i) to
convert all of the principal amount outstanding under the Subordinated Notes
into shares of Common Stock at the market price at the time the option is
exercised; (ii) to purchase shares of 6% Senior Preferred Stock of Tatham
Offshore with a liquidation preference value of $60 million, the proceeds from
which would be used to prepay the outstanding balance of the Subordinated
Notes; or (iii) to purchase all of the outstanding capital stock of Tatham
Offshore Development for $60 million, the proceeds from which would be used to
prepay the outstanding balance of the Subordinated Notes. DeepTech is required
to select one of the above restructuring transactions on or before December 31,
1997. As a result, the Company will no longer be obligated to make interest or
principal payments under the Subordinated Notes. Additionally, the Company
believes that by consummating one of the above restructuring transactions that
it will be able to continue to maintain its listing on The Nasdaq National
Market.
Tatham Offshore Development holds the leasehold interests in the
Sunday Silence Project. Under the Restructuring Option Agreement, Tatham
Offshore has the right to pursue the sale, farmout or other disposition of the
Sunday Silence Project during the option period. In the event that Tatham
Offshore enters into a sales agreement for 100% of Tatham Offshore Development
or the Sunday Silence Project prior to the expiration of the option period,
DeepTech has the further option to receive 50% of the cash proceeds from such
transaction as a prepayment of the Subordinated Notes. If DeepTech elects this
option, DeepTech has agreed to convert the remaining principal amount of the
Subordinated Notes into Common Stock at the market price. For purposes of
determining the market price of Common Stock under this agreement, the parties
have agreed the market price shall be the average of the closing prices for the
ten trading days immediately preceding the exercise date of the option.
DeepTech's option to acquire Tatham Offshore Development also includes all of
Tatham Offshore's
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interest in a drilling arrangement with Sedco Forex for the use of a
semisubmersible drilling rig in the Gulf of Mexico. Tatham Offshore has agreed
not to sell less than 100% of its interest in Tatham Offshore Development
pending the exercise by DeepTech of one of its options.
Ratification of this agreement shall be effective upon receiving the
affirmative vote of the holders of a majority of Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting. Under
Delaware law, an abstention would have the same legal effect as a vote against
this proposal, but a broker non-vote would not be counted for purposes of
determining whether a majority had been achieved. The Board of Directors
recommends voting "FOR" ratification by the stockholders of this agreement.
APPROVAL OF UP TO A TEN-FOR-ONE REVERSE STOCK SPLIT
(ITEM 4)
In order to comply with the listing requirements under Rule 4310
(c)(4) of the National Association of Securities Dealers, Inc., the Board of
Directors of Tatham Offshore has adopted, subject to stockholder approval, an
amendment to its Certificate of Incorporation to effect a reverse stock split
("Reverse Stock Split") pursuant to which up to ten shares of Tatham Offshore
Common Stock ("Old Common Stock") will become one share of Tatham Offshore's
then outstanding common stock ("New Common Stock").
The effect of the proposed amendment will be to reduce the number of
shares of Common Stock outstanding without a change in the par value of Common
Stock.
The Board of Directors believes that the present level of per share
market prices of the Common Stock impairs the acceptability of the Common Stock
by portions of the financial community and the investing public. Theoretically,
the number of shares outstanding should not, by itself, affect the marketability
of the stock, the type of investor who acquires it or a company's reputation in
the financial community, but in practice this is not necessarily the case, as
many investors look upon low priced stock as unduly speculative in nature and,
as a matter of policy, avoid investment in such stocks. The Board of Directors
also believes that the current per share price of the Common Stock has reduced
the effective marketability of the shares because of the reluctance of many
leading brokerage firms to recommend low priced stock to their clients.
Further, various brokerage house policies and practices tend to discourage
individual brokers from dealing in low priced stocks. Some of those policies
and practices pertain to the payment of brokers' commissions and to
time-consuming procedures which function to make the handling of low priced
stocks unattractive to brokers from an economic standpoint. In addition, the
structure of trading commissions also tends to have an adverse impact upon
holders of low priced stock because the brokerage commission on a sale of low
priced stock generally represents a higher percentage of the sale price than the
commission on higher priced issues.
Although there can be no assurance that the price of the Common Stock
after the Reverse Split will actually increase in an amount proportionate to
the decrease in the number of outstanding shares, the Reverse Stock Split is
intended to result in a price level for the Common Stock that will increase
investor interest, reduce resistance of brokerage firms to recommend the Common
Stock and maintain the Company's listing on The Nasdaq National Market.
Principal Effects
If the Reverse Stock Split is approved by the stockholders, the
Reverse Stock Split will become effective at such time as Tatham Offshore files
a Certificate of Amendment with the Secretary of State of Delaware (the
"Delaware Secretary of State"). Tatham Offshore will not file a Certificate of
Amendment with the Delaware Secretary of State unless the stockholders of
Tatham Offshore have approved this Proposal.
The Reverse Stock Split would not affect the proportionate equity
interest in Tatham Offshore of any holder of Common Stock, except as may result
from the provisions for the elimination of fractional shares as described below.
The Reverse Stock Split will not affect the registration of the Common Stock
under the Exchange Act or the listing of the Common Stock on The Nasdaq National
Market.
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The Reverse Stock Split may leave certain stockholders with one or more
"odd lots" of Tatham Offshore Common Stock, i.e., stock in amounts of less than
100 shares. These shares may be more difficult to sell, or require a greater
commission per share to sell, than shares in even multiples of 100.
As of September 15, 1997, there were outstanding options to purchase
shares and outstanding grants of SARs under Tatham Offshore's Incentive Plan and
Director Plan relating to an aggregate of 1,035,000 shares of Common Stock. All
of the outstanding options and other grants include provisions for adjustments
in the number of shares covered thereby, and the exercise price thereof, in the
event of a reverse stock split by appropriate action of the Compensation
Committee of Tatham Offshore's Board of Directors.
EXCHANGE OF STOCK CERTIFICATES AND ELIMINATION OF FRACTIONAL SHARE INTERESTS
As soon as possible after the Effective Date, holders of Common Stock
will be notified and requested to surrender their present Common Stock
certificates for new certificates representing the number of whole shares of
Common Stock after the reverse split. Until so surrendered, each current
certificate representing shares of Common Stock will be deemed for all corporate
purposes after the Effective Date to evidence ownership of Common Stock in the
appropriately reduced whole number of shares. ChaseMellon Shareholder Services,
L.L.C. will be appointed exchange agent (the "Exchange Agent") to act for
stockholders in effecting the exchange of their certificates.
No scrip or fractional share certificates for Common Stock will be
issued in connection with the reverse split, but in lieu thereof, a certificate
or certificates evidencing the aggregate of all fractional shares otherwise
issuable (rounded, if necessary, to the next higher whole share) shall be
issued to the Exchange Agent or its nominee, as agent for the accounts of all
holders of Common Stock otherwise entitled to have a fraction of a share issued
to them in connection with the reverse split. Sales of fractional interests
will be effected by the Exchange Agent as soon as practicable on the basis of
prevailing market prices of the Common Stock on The Nasdaq National Market at
the time of sale. After the Effective Date, the Exchange Agent will pay to
such stockholders their pro rata share of the net proceeds derived from the
sale of their fractional interests upon surrender of their stock certificates.
No service charges or brokerage commissions will be payable by stockholders in
connection with the sale of fractional interests, all of which costs will be
borne by Tatham Offshore.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain federal income tax
consequences of the Reverse Stock Split of Tatham Offshore Common Stock. This
discussion does not purport to deal with all aspects of federal income taxation
that may be relevant to holders of Common Stock and is not intended to be
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations and foreign
persons, may be subject to special rules. Furthermore, the following discussion
is based on current provisions of the Code and administrative and judicial
interpretations as of the date hereof, all of which are subject to change.
Holders of Common Stock are advised to consult their own tax advisors regarding
the federal, state, local and foreign tax consequences of the Reverse Stock
Split.
The Reverse Stock Split will be a tax-free recapitalization for Tatham
Offshore and its stockholders.
The New Common Stock in the hands of a stockholder will have an
aggregate basis for computing gain or loss equal to the aggregate basis of
shares of Old Common Stock held by that stockholder immediately prior to the
Reverse Stock Split reduced by the amount of proceeds, if any, received from the
sale of fractional interests and increased by any gain recognized on that sale.
A stockholder's holding period for the New Common Stock will be the
same as the holding period for the shares of Old Common Stock exchanged
therefor.
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<PAGE> 24
Stockholders who receive cash for all of their holdings will recognize
a gain or loss for federal income tax purposes as a result of the disposition of
their shares of Old Common Stock. Although the tax consequences to stockholders
who receive cash for some of their holdings are not entirely certain, those
stockholders in all likelihood will recognize a gain or loss for federal income
tax purposes as a result of the disposition of a portion of their shares of Old
Common Stock. Stockholders who do not receive any cash for their holdings will
not recognize any gain or loss for federal income tax purposes as a result of
the Reverse Stock Split.
VOTE REQUIRED
Approval of this proposal shall be effective upon receiving the
affirmative vote of the holders of a majority of Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting. Under
Delaware law, an abstention would have the same legal effect as a vote against
this proposal, but a broker non-vote would not be counted for purposes of
determining whether a majority had been achieved. The Board of Directors
recommends voting "FOR" approval by the stockholders of this proposal.
STOCKHOLDER PROPOSALS
PROPOSALS FOR 1998 ANNUAL MEETING
Pursuant to various rules promulgated by the Commission, any proposals
of holders of Common Stock of Tatham Offshore intended to be presented at the
Annual Meeting of Stockholders of Tatham Offshore to be held in 1998 must be
received by Tatham Offshore addressed to the Secretary, 7400 Texas Commerce
Tower, 600 Travis Street, Houston, Texas 77002, no later than May 12, 1998 in
order to be included in Tatham Offshore's proxy statement and form of proxy
relating to that meeting.
PROPOSALS FOR 1997 ANNUAL MEETING
With respect to business to be brought before the Annual Meeting,
Tatham Offshore has not received any notices from stockholders that it is
required to include in this Proxy Statement.
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<PAGE> 25
GENERAL
As of the date of this Proxy Statement, the management of Tatham
Offshore has no knowledge of any business to be presented for consideration at
the Annual Meeting other than that described above. If any other business
should properly come before the Annual Meeting, it is intended that the shares
represented by proxies will be voted with respect thereto in accordance with
the judgment of the persons named in such proxies.
The cost of any solicitation of proxies by mail will be borne by
Tatham Offshore. Arrangements may be made with brokerage firms and other
custodians, nominees and fiduciaries for the forwarding of material to and
solicitation of proxies from the beneficial owners of Common Stock held of
record by such persons, and Tatham Offshore will reimburse such brokerage
firms, custodians, nominees and fiduciaries for reasonable out of pocket
expenses incurred by them in connection therewith. In addition, Tatham
Offshore has retained ChaseMellon Shareholder Services, L.L.C. to perform a
proxy search to determine the beneficial owners of the Common Stock as of the
record date and will pay a fee to such firm of approximately $225 plus
reimbursement of expenses.
The information contained in this Proxy Statement in the section
entitled "Comparative Stock Performance" shall not be deemed incorporated by
reference by any general statement incorporating by reference any information
contained in this Proxy Statement into any filing under the Securities Act of
1933, as amended (the "Securities Act"), or the Exchange Act, except to the
extent that Tatham Offshore specifically incorporates by reference the
information contained in such sections, and shall not otherwise be deemed filed
under the Securities Act or the Exchange Act.
By Order of the Board of Directors,
THOMAS P. TATHAM
Chairman of the Board
Houston, Texas
October 27, 1997
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[FRONT SIDE OF PROXY]
PROXY
TATHAM OFFSHORE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Thomas P. Tatham and E. Lynn Hill as Proxies,
with the power of substitution, and authorizes them to represent and to vote at
the Annual Meeting of Stockholders to be held November 13, 1997, or any
adjournment thereof, all the shares of Common Stock of Tatham Offshore, Inc.
held of record by the undersigned on October 15, 1997, as designated below.
1. Election of directors -- director nominees:
Kenneth E. Beeney, Phillip G. Clarke, Antoine Gautreaux, Jr., E. Lynn
Hill, Edward L. Moses, Jr., Clyde E. Nath, James G. Niven, Jonathan D.
Pollock, Thomas P. Tatham, Roger B. Vincent, Sr., Diana J. Walters.
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as indicated below) to vote for all nominees
Instruction: to withhold authority to vote for any of the above
nominees, write the nominee's name(s) on this line.
---------------------------------------------------
2. To ratify the selection of Price Waterhouse LLP as
independent accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the Board of Directors' approval of the Company's
Restructuring Option Agreement with DeepTech International
Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve up to a ten-for-one reverse stock split of
Tatham Offshore's Common Stock and the related amendment
to the Company's Certificate of Incorporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. The Proxies are authorized to vote in their best judgment
upon such other business as may properly come before the
Annual Meeting.
[REVERSE SIDE OF PROXY]
This Proxy, when properly executed, will be voted in the manner
directed by the undersigned stockholder. Please refer to the Proxy Statement
for a discussion of each of these matters. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR THE PROPOSALS. As to any other matter, said Proxies
shall vote in accordance with their best judgment.
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. If acting as attorney, executor, trustee, or
in any other representative capacity, sign name and title.
Dated --------------------------, 1997
--------------------------------------
Signature
--------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE.
