EXHIBIT 99.1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[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 ss. 240.14a-11(c) or ss. 240.14a-12
VAALCO 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:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
VAALCO ENERGY, INC.
4600 POST OAK PLACE, SUITE 309
HOUSTON, TEXAS 77027
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, JUNE 24, 1998
Notice is hereby given that the Annual Meeting of the Stockholders of
VAALCO Energy, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, June 24, 1998 at 10:00 a.m. at the headquarters of the Company, 4600
Post Oak Place, Suite 309, Houston, Texas 77027, for the following purposes:
(1) To elect a Board of Directors as follows:
(a) The holders of Common Stock will elect two Class I
directors to hold office for the ensuing year, one Class
II director to hold office for the ensuing two years, and
two Class III directors to hold office for the ensuing
three years; and
(b) The holders of Convertible Preferred Stock, Series A, will
elect one Class I director to hold office for the ensuing
year, one Class II director to hold office for the ensuing
two years, and one Class III director to hold office for
the ensuing three years.
(2) To approve an amendment to the Company's Restated Certificate of
Incorporation that would increase the number of authorized shares
of Common Stock.
(3) To ratify the appointment of Deloitte & Touche as the independent
public accountants to audit the Company's accounts for the fiscal
year ended December 31, 1998.
(4) To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The holders of record of Common Stock and Convertible Preferred Stock,
Series A, of the Company at the close of business on June 8, 1998 will be
entitled to notice of and to vote at the Meeting.
By Order of the Board of Directors,
GAYLA M. CUTRER
Secretary
June 12, 1998
IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. EVEN IF YOU
PLAN TO BE PRESENT, YOU ARE URGED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY
PROMPTLY. IF YOU ATTEND THE MEETING YOU CAN VOTE EITHER IN PERSON OR BY YOUR
PROXY.
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VAALCO ENERGY, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, JUNE 24, 1998
This Proxy Statement is furnished to the record holders of common stock,
par value $0.10 per share ("Common Stock") and Convertible Preferred Stock,
Series A, par value $10.00 per share ("Preferred Stock") of VAALCO Energy, Inc.
(the "Company"), in connection with the solicitation by the Board of Directors
of the Company of proxies to be used at the annual meeting ("Meeting") of
stockholders to be held on Wednesday, June 24, 1998 at 10:00 a.m. at the
headquarters of the Company, 4600 Post Oak Place, Suite 309, Houston, Texas
77027, and any adjournment thereof.
Proxies in the form enclosed, properly executed by stockholders and
received in time for the Meeting, will be voted as specified therein. If a
stockholder does not specify otherwise, the shares represented by his or her
proxy will be voted FOR the nominees for election of directors as listed herein,
FOR the proposal to amend the Restated Certificate of Incorporation to increase
the number of authorized shares of Common Stock and FOR ratification of Deloitte
& Touche as the independent public accountants to audit the Company's accounts
for the fiscal year ending December 31, 1998. The giving of a proxy does not
preclude the right to vote in person should the person giving the proxy so
desire, and the proxy may be revoked at any time before it is exercised by
written notice delivered to the Company at or prior to the Meeting. The mailing
address of the Company's principal executive offices is 4600 Post Oak Place,
Suite 309, Houston, Texas 77027 (Tel. No. 713/623-0801). This Proxy Statement is
being mailed on or about June 12, 1998 to holders of record of Common Stock and
Preferred Stock at the close of business on June 8, 1998 (the "Record Date").
At the close of business on the Record Date, there were outstanding and
entitled to vote 20,749,968 shares of Common Stock and 10,000 shares of
Preferred Stock, and only the holders of record on such date shall be entitled
to vote at the Meeting. The holder of the Preferred Stock has the right to vote
as class with the holders of Common Stock on all matters submitted to a vote of
the holders of the Common Stock on an "as converted basis." Accordingly, with
respect to all matters to come before the Meeting other than the election of the
Preferred Stock Nominees (as defined below), each share of Common Stock entitles
the holder to one vote, and each share of Preferred Stock entitles the holder to
2,750 votes so that the total number of shares of Common Stock outstanding and
entitled to vote at the Meeting is 48,249,968. In addition, the holders of the
Preferred Stock will be entitled to appoint one director (each, a "Preferred
Stock Nominee") to each class of directors by voting separately as a class.
Regarding the election of directors, the enclosed form of proxy provides
a means for stockholders to vote FOR the nominees as directed therein, to
withhold authority to vote for one or more of the applicable nominees or to
withhold authority to vote for all of the applicable nominees. With respect to
other proposals to be voted upon, stockholders may vote in favor of a proposal,
against a proposal, or may abstain from voting. Unless a holder of Common Stock
or Preferred Stock who withholds authority votes in person at the meeting or
votes by means of another proxy, the withholding of authority will have no
effect upon the election of those directors for whom authority to vote is
withheld because the Company's By-laws provide that directors are elected by a
plurality of the votes cast. Under applicable Delaware law, a broker non-vote
will have no effect on the outcome of the election of directors. The affirmative
vote of the holders of at least 66 2/3% of the issued and outstanding shares of
Common Stock and, on an as converted basis, the Preferred Stock, voting together
as a class is required for the approval of the proposed amendment to the
Company's Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock. The affirmative vote of the holders of at
least a majority of the issued and outstanding shares of Common Stock and, on an
as converted basis, the Preferred Stock, voting together as a class present or
represented and entitled to vote at the Meeting is required for the ratification
of the appointment of auditors for the current fiscal year. With respect to the
proposed amendment to the Company's Restated Certificate of Incorporation, and
the ratification of the appointment of auditors,
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abstentions effectively constitute negative votes because such shares will be
considered as present and entitled to vote while broker non-votes will not be
counted as shares entitled to vote and will have no effect on the outcome of the
vote.
The holders of a majority of the issued and outstanding Common Stock
together with, on an as converted basis, the issued and outstanding Preferred
Stock, entitled to vote at the Meeting, present in person or represented by
proxy, constitutes a quorum for purposes of the Common Stock. The presence in
person or by proxy of the holders of record of one-third of the total number of
shares of Preferred Stock then outstanding and entitled to vote shall be
necessary and sufficient to constitute a quorum of holders of Preferred Stock.
At the Meeting or at any adjournment thereof, the absence of a quorum of the
holders of shares of Preferred Stock shall not prevent the election of directors
other than those to be elected by the holders of shares of Preferred Stock, and
the absence of a quorum of the holders of shares of the Common Stock shall not
prevent the election of directors to be elected by the holders of shares of
Preferred Stock.
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SECURITY OWNERSHIP OF PRINCIPAL
STOCKHOLDERS AND MANAGEMENT
The following table sets forth information with respect to the ownership
of shares of Common Stock as of April 30, 1998, by (i) each director of the
Company, (ii) all executive officers and directors of the Company as a group and
(iii) each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock or Preferred Stock. To the Company's
knowledge, the persons indicated below have sole voting and investment power
with respect to the shares indicated as owned by them, except as otherwise
stated. The address for each director and beneficial owner of more than 5% of
the outstanding shares of Common Stock is 4600 Post Oak Place, Suite 309,
Houston, Texas 77027, unless otherwise indicated.
COMMON STOCK PREFERRED STOCK
---------------------------------------- ---------------------------
PERCENT UPON
PERCENT OF CONVERSION OF PERCENT OF
NAME OF BENEFICIAL OWNER AMOUNT CLASS PREFERRED STOCK AMOUNT CLASS
------------------------ ------ ----- --------------- ------ -----
DIRECTORS
Robert L. Gerry III....... 1,500,000(1) 7.1 3.1 -- --
Virgil A. Walston, Jr..... 3,300,082(2) 15.9 6.8 -- --
W. Russell Scheirman...... 815,000(3) 3.8 1.7 -- --
Arne R. Nielsen........... -- -- -- -- --
Charles W. Alcorn, Jr..... 2,905,832(4) 14.0 6.0 -- --
Lawrence L. Tucker........ 31,263,441(5) 64.8 64.8 10,000 (5) 100%
T. Michael Long........... 31,263,441(5) 64.8 64.8 10,000 (5) 100%
Walter W. Grist........... -- -- -- -- --
Common Stock owned by
all directors and
executive officers
as a group (8 persons).. 39,784,355 80.3 80.3 10,000 100%
5% STOCKHOLDERS:
The 1818 Fund II, L.P..... 31,263,441(6) 64.8 64.8 10,000 100%
c/o Brown Brothers Harriman
& Co.
59 Wall Street
New York, New York 10005
Metropolitan Life Insurance
Company.................. 1,500,000(7) 7.2 3.1 -- --
One Madison Avenue
New York, New York 10010
- - --------------------------
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(1) Does not include 2,905,832 shares owned by Mr. Charles W. Alcorn, Jr.
for which Mr. Alcorn has appointed Mr. Gerry as proxy. Includes 500,000
shares that may be acquired within sixty days upon the exercise of
options. For a description of the options that have been granted to Mr.
Gerry, see "Executive Compensation."
(2) Excludes 148,700 shares of Common Stock owned by Mr. Walston's sons in
which Mr. Walston disclaims beneficial ownership. Also includes 177,500
shares of Common Stock owned by V.A. Walston & Associates, Inc.
(3) Includes 815,000 shares that may be acquired within sixty days upon the
exercise of options. For a description of the options and stock
appreciation rights ("SARs") that have been granted to W. Russell
Scheirman, see "Executive Compensation."
(4) Includes 177,500 shares of Common Stock issued to Alcorn Production
Company, a company controlled by Mr. Alcorn.
(5) Mr. Tucker and Mr. Long are each deemed to beneficially own the shares
of Common Stock and Preferred Stock held by The 1818 Fund II, L.P. (the
"Fund") See note (6) below.
(6) Includes 27,500,000 shares issuable upon conversion of the Preferred
Stock. The sole general partner of Fund is Brown Brothers Harriman &
Co., a New York limited partnership ("BBH&C"). By virtue of BBH&C's
relationship with the Fund, BBH&C may be deemed to beneficially own
31,263,441 shares of Common Stock and 10,000 shares of Preferred Stock.
Lawrence L. Tucker and T. Michael Long are general partners of BBH&C. By
virtue of a resolution adopted by BBH&C designating Messrs. Tucker and
Long, or either of them, as the sole and exclusive partners of BBH&C
having voting power (including the power to vote or to direct the
voting) and investment power (including the power to dispose or to
direct the disposition) with respect to the securities of the Company,
each of Messrs. Long and Tucker may be deemed to beneficially own
31,263,441 shares of Common Stock and 10,000 shares of Preferred Stock.
The address of BBH&C, Mr. Long and Mr. Tucker is 59 Wall Street, New
York, New York 10005.
(7) Based on a Schedule 13G dated February 6, 1998, filed by Metropolitan
Life Insurance Company ("Metropolitan") which states that all 1,500,000
shares were acquired for the benefit of Metropolitan's affiliate, State
Street Research & Management Company, Inc., an investment adviser
registered under Section 203 of the Investment Advisers Act.
ITEM 1.
ELECTION OF DIRECTORS
NOMINEES
Pursuant to the Company's Restated Certificate of Incorporation, the
Board of Directors is divided into three classes that are elected for staggered
three-year terms and hold office until their successors are duly elected and
qualified. Each of the current directors is presently serving an indefinite term
because his successors have not been duly elected and qualified. It is the Board
of Directors intention to re-establish the staggered terms at the Meeting.
Accordingly, the term of the Class I directors, currently comprised of Messrs.
Nielsen, Scheirman and Tucker, will expire at the 1999 Annual Meeting of
Stockholders. The term of the Class II directors, currently comprised of Messrs.
Walston and Long, will expire at the 2000 Annual Meeting of Stockholders. The
term of the Class III directors, currently comprised of Messrs. Alcorn, Gerry
and Grist, will expire at the 2001 Annual Meeting of Stockholders. The nominees
for election at the Meeting, other than the Preferred Stock Nominees, are
Messrs. Nielsen and Scheirman as Class I nominees, Mr. Walston as a Class II
nominee and Messrs. Alcorn and Gerry as Class III nominees. Each of these
nominees will be elected by both the holders of the Common Stock and, on an as
converted basis, the owners of the Preferred Stock, voting together as a class.
The Company's Certificate of Designation, pursuant to which the Preferred Stock
was issued to the Fund on April 21, 1998, provides that the holders of the
Preferred Stock have the right to appoint three directors to the Company's Board
of Directors, voting together as a class. Accordingly, on April 21, 1998,
Messrs. Tucker, Long and Grist were appointed directors by the Fund and have
been nominated as the Preferred Stock Nominees as Class I, Class II and Class
III directors, respectively. Each director elected by the holders of shares of
Preferred Stock shall, unless his or her term shall expire earlier in accordance
with the provisions thereof, hold office until the annual meeting of
stockholders at which directors of the class to which he has been elected stand
for election or until his successor, if any, is elected and qualified.
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If any director so elected by the holders of Preferred Stock shall cease
to serve as a director before his or her term shall expire (except by reason of
the termination of the voting rights accorded to the holders of Preferred Stock
in accordance with the Certificate of Designation, the holders of the Preferred
Stock then outstanding and entitled to vote for such director may, by written
consent as provided herein, elect a successor to hold office for the unexpired
term of the director whose place shall be vacant. Any director elected by the
holders of shares of Preferred Stock voting separately as a single class may be
removed from office with or without cause by the vote or written consent of the
holders of at least a majority of the outstanding shares of Preferred Stock, at
the time of removal.
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information with respect to the nominees,
all current directors and present executive officers of the Company. Each
executive officer has been elected to serve until his successor is duly
appointed or elected by the Board of Directors or their earlier removal or
resignation from office.
CLASS I DIRECTOR, AGE AND POSITION WITH THE COMPANY DIRECTOR SINCE
- - --------------------------------------------------- --------------
Arne R. Nielson, 71, Director......................... 1989
W. Russell Scheirman, 43, President, Chief Financial
Officer and Director............................. 1991
Lawrence L. Tucker, 56, Director ..................... 1998
CLASS II DIRECTOR, AGE AND POSITION WITH THE COMPANY DIRECTOR SINCE
- - ---------------------------------------------------- --------------
Virgil A. Walston, Jr., 62, Vice Chairman of the Board
and Chief Operating Officer...................... 1989
T. Michael Long, 54, Director ........................ 1998
CLASS III DIRECTOR, AGE AND POSITION WITH THE COMPANY DIRECTOR SINCE
- - ----------------------------------------------------- --------------
Robert L. Gerry, III, 60, Chairman of the Board
Chief Executive Officer.......................... 1997
Charles W. Alcorn, Jr., 70, Director.................. 1989
Walter W. Grist, 57, Director ........................ 1998
The following is a brief description of the background and principal
occupation of each director (including each nominee) and executive officer:
ARNE R. NIELSON - Mr. Nielson has been a Director of the Company since
March 1989. He is currently the Chairman and Chief Executive Officer of
Shiningbank Energy Income Fund, a position he has held since 1996. He served as
the Chairman of the Board of Serenpet, Inc. from April 1995 through July 1996,
President, Chief Executive Officer and Chairman of the Board of Poco Petroleums
Ltd. from January 1992 through May 1994, and President and Chief Executive
Officer of Bowtex Energy (Canada) Corporation from July 1990 through January
1992. Mr. Nielsen also served as the Chairman of the Board and Chief Executive
Officer of Mobil Oil Canada from April 1986 to January 1989.
W. RUSSELL SCHEIRMAN - Mr. Scheirman has served as the President of the
Company since 1992, and as Chief Financial Officer and a Director of the Company
since 1991. From 1991 to 1992, Mr. Scheirman was Executive Vice President of the
Company. He was an Associate at McKinsey & Company, Inc. from 1989 to 1991, an
investment banker with Copeland, Wickersham and Wiley from 1984 to 1989, and a
Petroleum Reservoir Engineer for Exxon Company, U.S.A. from 1978 to 1984. Mr.
Scheirman
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holds a B.S. (Summa Cum Laude) and M.S. in Mechanical Engineering from Duke
University (1977 and 1978, respectively) and an M.B.A. from California Lutheran
University (1984).
LAWRENCE C. TUCKER - Mr. Tucker is a general partner of Brown Brothers
Harriman & Co. ("BBH&CO"), a private banking company, and has been with BBH&Co.
for 32 years. Mr. Tucker currently serves as a member of the Steering Committee
of BBH&Co. With T. Michael Long, Mr. Tucker is responsible for the corporate
finance activities of BBH&CO., including management of the 1818 Funds, private
equity investing partnerships with committed capital exceeding $1 billion. Mr.
Tucker is a director of WorldCom, Inc., Riverwood International Corporation and
WellCare Management Group, Inc. Mr. Tucker has a B.S. degree from Georgia
Institute of Technology and an MBA from the Wharton School of the University of
Pennsylvania.
VIRGIL A. WALSTON, JR. - Mr. Walston, a co-founder of the Company, has
been the Chief Operating Officer and Vice-Chairman of the Board of Directors of
the Company since 1989. Mr. Walston was a Manager-Middle East/Far East
Operations for Occidental Petroleum, Inc. from 1983 to 1985. He was a General
Manager for Cities East Asia from 1980 to 1983, a Manager of Exploration
Operations for Cities Eastern International in 1979, New Ventures Manager for
Cities International from 1976 to 1979, an Exploration Manager for Cities
Service Indonesia in 1976, Geological Manager for Cities Service Philippines in
1975, Senior Project Manager for Cities Service East Asia in 1974, and a
Petroleum Geologist for ESSO Libya and ESSO Eastern from 1963 to 1974. Mr.
Walston holds a B.S. in Geology from the University of Texas (1959) and an M.S.
in Geology from Texas Tech University (1963). Mr. Alcorn is Mr. Walston's
brother-in-law.
T. MICHAEL LONG - Mr. Long is a general partner of BBH&Co. and has been
with BBH&Co. for 27 years. With Mr. Tucker, Mr. Long is responsible for the
corporate finance activities of BBH&Co., including management of the 1818 Funds,
private equity investing partnerships with committed capital exceeding $1
billion. Mr. Long received a B.A. degree in government cum laude from Harvard
College in 1965 and was the recipient of The Harvard University Corning Glass
Traveling Fellowship for 1965-66. He received an MBA with high distinction from
The Harvard University Graduate School of Business in 1971. Mr. Long is a
director of Columbia/HCA Healthcare Corporation, Computerized Medical Systems,
Inc., Gulf Canada Resources Limited, Steri-Oss, Inc., and Winrock Enterprises,
Inc.
ROBERT L. GERRY, III - Mr. Gerry has been Chairman of the Board and
Chief Executive Officer of the Company since August 1997. Until August 1997, Mr.
Gerry was Vice-Chairman of Nuevo Energy Company ("Nuevo") since February 1994,
prior to which he was President and Chief Operating Office of Nuevo since its
formation in March 1990. He has been Senior Vice President of Energy Assets
International Corporation ("EAIC") since January 1989. For ten years prior to
joining EAIC, Mr. Gerry was active as an independent investor concentrating on
energy investments. He currently serves on the Board of Directors of Nuevo
Energy Company, a position he has held since 1990, and Earth Satellite
Corporation and as a Trustee of Texas Children's Hospital.
CHARLES W. ALCORN, JR. - Mr. Alcorn, a co-founder of the Company, has
been a Director of the Company since 1989. From 1989 to August 1997, he served
as Chief Executive Officer and Chairman of the Board. He was the Chairman of Mid
Continent Oil and Gas Association from 1994 to 1995 In 1965, Mr. Alcorn founded
Alcorn Production Company, where he currently serves as the Chief Executive
Officer. In 1965, he was also the founder of Alcorn Well Service, where he
served as the Chief Executive Officer until 1990. He was employed as a Petroleum
Geologist and Area Geologist for Warren Petroleum and Gulf Oil Corporation from
1952 to 1965. Mr. Alcorn holds a B.S. in Geology from the University of Texas
(1952). Mr. Walston is Mr. Alcorn's brother-in-law.
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WALTER W. GRIST - Mr. Grist has been with BBH&Co. for over 30 years. Mr.
Grist is one of several managers of the 1818 Funds, private equity investing
partnerships with committed capital exceeding $1 billion. Mr. Grist received his
B.S. degree is Business Administration at New York University in 1965. Mr. Grist
is a director of Computerized Medical Systems, Inc., Steri-Oss, Inc., and
WellCare Management Group, Inc.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the Commission initial reports of ownership and reports of changes
in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten percent stockholders are required by
the Commission's regulations to furnish the Company with copies of all Section
16(a) forms they filed with the Commission.
To the Company's knowledge and except as otherwise set forth below,
based solely on review of the copies of such reports furnished to the Company
and written representations that no other reports were required, during the
fiscal year ended December 31, 1997, the Company's officers, directors and
greater than ten percent stockholders had complied with all Section 16(a) filing
requirements. Mr. Scheirman failed to timely file a Form 4 following a single
grant to him of options to purchase 1,000,000 shares of Common Stock in 1996.
INFORMATION CONCERNING THE OPERATION OF THE BOARD OF DIRECTORS
The business of the company is managed under the direction of the Board
of Directors. The board of Directors meets on a quarterly basis to review
significant developments affecting the Company and to act on matters requiring
Board approval. The Board of Directors may also hold special meetings when an
important matter requires Board action between regularly scheduled meetings.
Directors are not compensated for service on the Board of Directors or any
committee thereof.
During 1997, the Board of Directors held five meetings and executed two
unanimous consents in lieu of meetings. All directors were present at all of the
meetings, except that Mr. Nielson did not attend one of the meetings.
In order to facilitate the various functions of the Board of Directors,
the Board of Directors has created an Audit Committee. Prior to May 5, 1998, the
sole member of the audit committee was Arne R. Nielson. On May 5, 1998, the
Board re-appointed Mr. Nielson and appointed Walter W. Grist to the Audit
Committee. The Audit Committee (i) reviews with the Company's independent
auditors the scope of the annual audit, (ii) reviews the independent auditors'
management letter and (iii) meets with the Company's internal auditors. Also on
May 5, 1998, the Board created a Compensation Committee comprised of T. Michael
Long and Lawrence C. Tucker, both of whom are non-employee directors. The
Compensation Committee establishes and approves the terms of employment of
executive officers and reviews and approves management's recommendations
concerning compensation of certain other employees. The functions customarily
performed by a nominating committee are performed by the entire Board of
Directors.
It is the intention of the persons named in the proxy to vote the
proxies FOR the election of the nominees named below, unless otherwise
specified. The management of the Company does not contemplate that any of such
nominees will become unavailable for any reason, but if that should occur before
the meeting, proxies will be voted for another nominee, or other nominees, to be
selected by the Board of Directors of the Company. See "Stockholders' Proposals
for Next Annual Meeting."
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was a party to consulting agreements with entities
controlled by Messrs. Alcorn and Walston which terminated in August 1997.
General and administrative expenses for consulting services to these entities
were $50,000 and $360,000 for the years ended December 31, 1997 and 1996,
respectively. See "Executive Compensation--Employment and Consulting
Agreements."
EXECUTIVE COMPENSATION
CASH COMPENSATION
The following table sets forth all compensation, for each executive
officer of the Company, including salaries, fees, bonuses and deferred
compensation, paid or accrued for the account of such persons for services
rendered in all capacities during the three-year period ended December 31, 1997.
The Company does not maintain any pension plans for the persons named below or
any other employees of the Company domiciled in the United States.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- --------------------- ----------
OTHER ANNUAL RESTRICTED OPTIONS/
NAME AND COMPENSATION STOCK WARRANTS/ LTIP ALL OTHER
PRINCIPAL POSITION (1) YEAR SALARY BONUS (2) AWARDS SARS(#) PAYOUTS COMPENSATION
- - ----------------------------------------- ---- -------- -------- ------------ ---------- --------- --------- ------------
Robert L. Gerry III ..................... 1997 $ 97,780 0 0 0 1,000,000 0 0
Chief Executive Officer
Chairman of the Board
Charles W. Alcorn, Jr ................... 1997 $ 56,000 $ 0 $ 50,000 0 0 0 0
Former Chief Executive Officer and 1996 96,000 0 180,000 0 0 0 0
Chairman of the Board 1995 96,000 0 180,000 0 0 0 0
Current Board Member
Virgil A. Walston, Jr ................... 1997 143,500 $ 0 0 0 0 0 0
Chief Operating Officer 1996 96,000 0 180,000 0 0 0 0
and Vice Chairman of the Board 1995 96,000 0 180,000 0 0 0 0
W. Russell Scheirman .................... 1997 160,000 0 0 0 0 0 0
President and 1996 160,000 0 0 0 1,000,000 0 0
Chief Financial Officer 1995 160,000 0 0 0 0 0 0
William Pritchard (3) ................... 1997 126,667 0 0 0 0 0 0
1996 53,333 0 0 0 1,000,000 0 0
- - ------------
(1) Mr. Alcorn resigned as Chairman of the Board and Chief Executive Officer
of the Company, and Mr. Gerry was appointed Chairman of the Board and
Chief Executive Officer of the Company effective August 1, 1997.
(2) The Company was a party to Consulting Agreements from February 15, 1988
through July 31, 1997 with Alcorn Production Company which is
wholly-owned by Mr. Alcorn, and V.A. Walston & Associates, Inc., which
is wholly-owned by Mr. Walston. Under the Consulting Agreements, the
Company was required to pay Alcorn Production Company and V.A. Walston &
Associates, Inc. $180,000 per year.
(3) Mr. Pritchard was an executive officer of the Company from September
1996 to October 1997. He is no longer employed by the Company.
EMPLOYMENT AND CONSULTING AGREEMENTS
From August 1, 1997 to August 1, 1998, the Company is a party to an
Employment Agreement with Mr. Robert L. Gerry which provides that Mr. Gerry
shall serve as Chief Executive Officer of the Company, as a director and as the
Chairman of the Board during the term of the Agreement for annual
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compensation of $225,000 per year. He is entitled to reimbursement for all
reasonable and necessary business expenses incurred in the performance of his
services under the Agreement. Mr. Gerry is also entitled to a bonus in the
discretion of the Board of Directors as to amount and timing, as well as
participation in the Company's medical and disability plans on terms no less
favorable than those applicable to other executive officers of the Company and
life insurance in the amount of $70,000. Pursuant to the Agreement, Mr. Gerry
was granted options to purchase 1,000,000 shares of the Company's Common Stock
at an exercise price of $0.625 per share, and 500,000 shares of Common Stock
vested on August 1, 1997 and 500,000 shares of Common Stock will vest on August
1, 1998. The options may be exercised for five years from the vesting date. None
of the options had been exercised as of April 30, 1998. The Agreement terminates
upon death, incapacity for a period of 180 continuous days, cause, the
occurrence of circumstances that make it impossible or impractical for the
business of the Company to be continued or prior written notice to the Company
by Mr. Gerry. In the event that Mr. Gerry's employment is terminated other than
for cause or by Mr. Gerry upon prior notice, he is entitled to receive a lump
sum payment equal to the remaining compensation due through the date the
Agreement would otherwise have terminated as well as the continuation of other
benefits granted under the Agreement.
From March 15, 1993 through August 1, 1998, the Company is a party to an
Employment Agreement with Mr. Scheirman which provides that Mr. Scheirman shall
serve as President and Chief Financial Officer of the Company and as a director
of the Company during the term of the Agreement for annual compensation of
$160,000. He is entitled to reimbursement for all reasonable and necessary
business expenses incurred in the performance of his services under the
Agreement. Mr. Scheirman is also entitled to a bonus in the discretion of the
Board of Directors as to amount and timing, as well as participation in the
Company's medical and disability plans on terms no less favorable than those
applicable to other executive officers of the Company and life insurance in the
amount of $70,000. Pursuant to the Agreement, options were granted to Mr.
Scheirman for 1,000,000 shares of the Common Stock of the Company at exercise
prices of $0.375 per share for 400,000 shares, $0.50 per share for 300,000
shares and $1.00 per share for 300,000 shares. The options vest over a term of
three years and may be exercised for five years from the vesting date. As of
April 30, 1998, Mr. Scheirman had vested options to purchase 340,000 shares at
$0.375 per share, 300,000 shares at $0.50 per share and 100,000 shares at $1.00
per share. None of the options had been exercised as of April 30, 1998. This
Agreement terminates upon death, incapacity for a period of 180 continuous days,
cause, the occurrence of circumstances that make it impossible or impractical
for the business of the Company to be continued or prior written notice to the
Company by Mr. Scheirman. In the event that Mr. Scheirman's employment is
terminated other than for cause or by Mr. Scheirman upon prior notice, he is
entitled to receive a lump sum payment equal to the remaining compensation due
through the date the Agreement would otherwise have terminated as well as the
continuation of other benefits granted under this Agreement.
Under both Mr. Gerry's and Mr. Scheirman's employment agreements,
"cause" is defined as the entry of a final and non-appealable judgment by a
court of competent jurisdiction to the effect that the employee, in connection
with his services for the Company, committed any act or omission which was
criminal or constituted willful or wanton misconduct.
From March 1, 1992 through July 31, 1997, the Company was a party to an
Employment Agreement with each of Messrs. Alcorn and Walston. Each Employment
Agreement provided for an annual salary of $96,000 and the use of a motor
vehicle at the Company's expense.
From September 1, 1996 through September 1, 1997, the Company was a
party to an Employment Agreement with Mr. William Pritchard which provided for
annual compensation of $160,000. Mr. Pritchard was granted 1,000,000 warrants to
purchase shares of the Company's Common Stock. The warrants are for a term of
five years and consist of the right to purchase 250,000 shares of Common Stock
at an exercise price of $0.50 per share, 250,000 shares of Common Stock at an
exercise price of $2.50 per share, 250,000 shares of Common Stock at an exercise
price of $5.00 per share, and 250,000 shares of Common Stock at an exercise
price of $7.50 per share. The warrants were completely vested at December 31,
1996. None of the warrants had been exercised as of April 30, 1997.
-10-
OPTION/SAR GRANTS IN 1997
The following table sets forth certain information concerning the grant
in 1997 of options to purchase Common Stock to the Chief Executive Officer of
the Company. No option grants or SAR grants were awarded to any other executive
officer during 1997.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS/GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR ($/SH) DATE
---- --------------- --------- ----- ----------
Robert L. Gerry III 1,000,000 100% $0.625 (1)
- - -----------------
(1) Of the options granted to Mr. Gerry, 500,000 vested on August 1, 1997
and terminate on August 1, 2002 and 500,000 will vest on August 1, 1998
and terminate on August 1, 2003.
-11-
AGGREGATED OPTION/SAR EXERCISES IN 1997 AND OPTION/SAR VALUES AT
DECEMBER 31,1997
The following table sets forth certain information concerning options to
purchase Common Stock and SARs granted to the executive officers named in the
Summary Compensation Table. No stock options or SARs were exercised by such
persons in 1997.
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS (1)
------------------
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
- - ---- --------------- -------------- ------------ ------------------
Robert L. Gerry III(2) -- -- 500,000/500,000 656,250/656,250
Charles W. Alcorn, Jr.(2) -- -- --/-- --/--
Virgil A. Walston, Jr. -- -- --/-- --/--
W. Russell Scheirman -- -- 815,000/260,000 (3) 1,056,250/281,250
75,000/-- (4)
William Pritchard(5) -- -- 1,000,000/-- (6) 359,375/--
- - -----------
(1) Based on a stock price of $1.9375 per share at December 31, 1997.
(2) Mr. Alcorn resigned as Chairman of the Board and Chief Executive Officer
of the Company and Mr. Gerry was appointed Chairman of the Board and
Chief Executive Officer of the Company, effective August 1, 1997.
(3) Represents options to purchase Common Stock
(4) Represents stock appreciation rights.
(5) Mr. Pritchard was an executive officer of the Company from September
1996 to October 1997. He is no longer employed by the Company.
(6) Represents warrants to purchase Common Stock.
LONG-TERM INCENTIVE PLANS
At this time, the Company has no long-term incentive plans.
ITEM 2.
PROPOSAL TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors of the Company has unanimously approved and
recommends that the stockholders approve a proposal to amend Article Four of the
Company's Restated Certificate of Incorporation to increase the authorized
shares of the Company's Common Stock from 50,000,000 shares to 100,000,000
shares (the "Amendment"). No change is proposed to be made to the number of
authorized shares of Preferred Stock.
The text of the first paragraph of Article Four of the Restated
Certificate of Incorporation, as proposed to be amended, reads as follows:
"The aggregate number of shares which the corporation has authority to
issue is 100,500,000, of which 100,000,000 shares shall be a class
designated as Common Stock with a par value of $0.10 per share, and
500,000 shares shall be a class designated as Preferred Stock with a par
value of $25.00 per share. The Board of Directors is authorized, subject
to limitations prescribed by law and the provisions of this Article
Four, to provide for the issuance of shares of Preferred Stock in
series, and, by filing a certificate pursuant to the applicable law of
the State of Delaware, to establish from time
-12-
to time the number of shares to be included in each such series, and to
fix the designation, powers, preferences and rights of the shares of
each series and the qualifications, limitations or restrictions
thereof."
At the close of business on the Record Date the Company had 20,749,968
outstanding shares of Common Stock, 27,500,000 shares are reserved for issuance
upon conversion of the Preferred Stock and approximately 3,075,000 shares
reserved for issuance pursuant to stock options and warrants granted to
employees. The 1818 Fund II, L.P. and certain directors and executive officers
of the Company have agreed not to exercise outstanding Preferred Stock or
Options convertible into Common Stock owned by them provided that the Company
caused the stockholders to vote to increase the number of authorized shares
under the Restated Certificate of Incorporation.
The Board of Directors of the Company believes the proposed increase in
the authorized shares of Common Stock is in the best interests of the Company
and its stockholders. The increase would provide the Company with needed
flexibility to act with respect to possible future financings, investment
opportunities, acquisitions, stock dividends, stock issuances under employee
stock option grants and other corporate purposes without the delay and expense
involved in obtaining stockholder approval each time an event requiring the
issuance of shares may arise.
Other than fulfilling the Company's obligations to issue stock pursuant
to the conversion of the Preferred Stock and the exercise of stock options and
warrants, the Company has no specific plans calling for the issuance of any
additional shares of Common Stock. The Company's issuance of additional shares
of Common Stock, including the shares of Common Stock that will be authorized if
the Amendment is approved, may dilute the equity ownership position of current
holders of Common Stock. If the Amendment is approved, the Company's Board of
Directors generally may issue the additional authorized shares of Common Stock
without further shareholder approval. In some instances, shareholder approval
for the issuance of additional shares may be required by law or by any exchange
on which the Company may be listed. All newly authorized shares would have the
same rights as the presently authorized shares, including the right to cast one
vote for each share held of record on all matters submitted to a vote of
stockholders and, subject to the rights of the holders of Preferred Stock, to
participate in dividends when and to the extent declared and paid. Holders of
Common Stock do not have preemptive rights and are not entitled to cumulate
votes for the election of directors.
The availability of authorized but unissued shares of Common Stock might
be deemed to have the effect of preventing or discouraging an attempt by another
person to obtain control of the Company, because the additional shares could be
issued by the Board of Directors, which could dilute the stock ownership of such
person. The Company has no plans for such issuances and this proposal is not
being proposed in response to any known effort to acquire control of the
Company.
Adoption of the amendment to the Restated Certificate of Incorporation
requires the affirmative vote of at least 66-2/3% of the issued and outstanding
shares of Common Stock and, on an as converted basis, the Preferred Stock,
voting together as a single class.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSAL IS IN THE BEST
INTEREST OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE PROPOSAL. PROXIES SOLICITED BY THE BOARD WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY A CONTRARY CHOICE IN THEIR PROXIES.
-13-
ITEM 3.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Deloitte & Touche has been selected by the Company as its principal
independent auditors for the Company's fiscal year ending December 31, 1998, and
served in such capacity for the Company's fiscal year ended December 31, 1997.
The Board recommends that the stockholders vote FOR the ratification of the
appointment by the Board of Directors of Deloitte & Touche to serve as the
Company's principal independent auditors for the fiscal year ending December 31,
1998.
Representatives of Deloitte & Touche are expected to be present at the
Meeting with the opportunity to make a statement if they desire to do so, and
such representatives are expected to be available to respond to appropriate
questions. If the stockholders do not ratify the selection of this firm, the
Board of Directors will consider the selection of another firm of independent
certified public accountants.
STOCKHOLDERS' PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock intended to be presented at the
annual meeting of stockholders of the Company to be held in 1999 must be
received by the Company at its principal executive offices, 4600 Post Oak Place,
Suite 309, Houston, Texas 77027, no later than February 12, 1999, in order to be
included in the proxy statement and form of proxy relating to that meeting.
In order to avoid controversy as to the date on which any such proposal
is received by the Company, it is suggested that stockholders submit their
proposals by certified mail, return receipt requested.
OTHER MATTERS
The management of the Company knows of no other matters which may come
before the Meeting. However, if any matters other than those referred to above
should properly come before the Meeting, it is the intention of the persons
named in the enclosed proxy to vote such proxy in accordance with their best
judgment.
The cost of solicitation of proxies in accompanying form will be paid by
the Company. In addition to solicitation by use of the mails, certain officers
or employees of the Company may solicit the return of proxies by telephone,
telegram or personal interview.
The Company will provide without charge to any stockholder as of the
Record Date a copy of the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997, upon written or oral request to the Investor
Relations Department, VAALCO Energy, Inc., 4600 Post Oak Place, Suite 309,
Houston, Texas 77027, telephone (713) 628-0801.
By Order of the Board of Directors,
/s/ GAYLA M. CUTRER
Secretary
June 12, 1998
-14-
PROXY FOR HOLDERS OF COMMON STOCK
VAALCO ENERGY, INC.
4600 Post Oak Place, Suite 309, Houston, Texas 77027
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF VAALCO ENERGY, INC. (THE
"COMPANY") FOR THE ANNUAL MEETING OF STOCKHOLDERS ON JUNE 24, 1998.
The undersigned hereby constitutes and appoints Robert L Gerry III and W.
Russell Scheirman, or either of them, with full power of substitution and
revocation to each, the true and lawful attorneys and proxies of the undersigned
at the Annual Meeting of Stockholders of VAALCO Energy, Inc. to be held on June
24, 1998, at 10:00 a.m., Houston time, at the headquarters of the Company, 4600
Post Oak Place, Suite 309, Houston, Texas 77027or any adjournments thereof (the
"Annual Meeting") and to vote the shares of Common Stock of the Company, $.10
par value per share ("Shares") standing in the name of the undersigned on the
books of the Company on the record date for the Annual Meeting, with all powers
the undersigned would possess if personally present at the Annual Meeting:
1. PROPOSAL TO ELECT AS DIRECTORS of the Company two nominees for the Class I
positions for a one-year term, one nominee for the Class II position for a
two year term and two nominees for the Class III positions for a three year
term. Directors will hold office for the stated term or until their
successors are elected and shall qualify. Nominees: Class I: Arne R. Nielson
and W. Russell Scheirman; Class II: Virgil A. Walston, Jr.; Class III:
Robert L. Gerry III and Charles W. Alcorn, Jr.
[ ] FOR all nominees [ ] WITHHOLD authority only [ ] WITHHOLD authority
for those nominee(s) whose for ALL nominees
names I have written below
--------------------------
--------------------------
--------------------------
--------------------------
2. PROPOSAL TO APPROVE THE AMENDMENT TO ARTICLE FOUR OF THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION to increase the authorized shares
of the Company's Common Stock from 50,000,000 shares to 100,000,000
shares:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE, as the
independent auditors of the Company for the fiscal year ending December
31, 1998:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES AND
FOR THE FOREGOING PROPOSALS AND, IF NO SPECIFICATION IS MADE, THE SHARES WILL BE
VOTED FOR SAID NOMINEES AND PROPOSALS.
The undersigned hereby acknowledges previous receipt of the Notice of Annual
Meeting of Stockholders and the Proxy Statement and hereby revokes any proxy or
proxies heretofore given by the undersigned.
Dated ___________________________, 1998.
---------------------------------------
Stockholder's Signature
Signature should agree with name printed
herein. If Shares are held in name of
more than one person, EACH joint owner
should sign. Executors, administrators,
trustees, guardians, and attorneys
should indicate the capacity in which
they sign. Attorneys should submit
powers of attorney.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY IN THE STAMPED,
PRE-ADDRESSED ENVELOPE ENCLOSED.
PROXY FOR HOLDERS OF CONVERTIBLE PREFERRED STOCK, SERIES A
VAALCO ENERGY, INC.
4600 Post Oak Place, Suite 309, Houston, Texas 77027
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF VAALCO ENERGY, INC. (THE
"COMPANY") FOR THE ANNUAL MEETING OF STOCKHOLDERS ON JUNE 24, 1998.
The undersigned hereby constitutes and appoints Robert L Gerry III and W.
Russell Scheirman, or either of them, with full power of substitution and
revocation to each, the true and lawful attorneys and proxies of the undersigned
at the Annual Meeting of Stockholders of VAALCO Energy, Inc. to be held on June
24, 1998, at 10:00 a.m., Houston time, at the headquarters of the Company, 4600
Post Oak Place, Suite 309, Houston, Texas 77027or any adjournments thereof (the
"Annual Meeting") and to vote the shares of Convertible Preferred Stock, Series
A, of the Company, $10.00 par value per share ("Shares") standing in the name of
the undersigned on the books of the Company on the record date for the Annual
Meeting, with all powers the undersigned would possess if personally present at
the Annual Meeting:
1. PROPOSAL TO ELECT AS DIRECTORS of the Company three nominees for the
Class I positions for a one-year term, two nominees for the Class II
positions for a two year term and three nominees for the Class III
positions for a three year term. Directors will hold office for the
stated term or until their successors are elected and shall qualify.
Nominees: Class I: Arne R. Nielson, W. Russell Scheirman and Lawrence L.
Tucker; Class II: Virgil A. Walston, Jr. and T. Michael Long; Class III:
Robert L. Gerry III , Charles W. Alcorn, Jr. and Walter W. Grist
[ ] FOR all nominees [ ] WITHHOLD authority only [ ] WITHHOLD authority
for those nominee(s) whose for ALL nominees
names I have written below
--------------------------
--------------------------
--------------------------
--------------------------
2. PROPOSAL TO APPROVE THE AMENDMENT TO ARTICLE FOUR OF THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION to increase the authorized shares
of the Company's Common Stock from 50,000,000 shares to 100,000,000
shares:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE, as the
independent auditors of the Company for the fiscal year ending December
31, 1998:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES AND
FOR THE FOREGOING PROPOSALS AND, IF NO SPECIFICATION IS MADE, THE SHARES WILL BE
VOTED FOR SAID NOMINEES AND PROPOSALS.
The undersigned hereby acknowledges previous receipt of the Notice of Annual
Meeting of Stockholders and the Proxy Statement and hereby revokes any proxy or
proxies heretofore given by the undersigned.
Dated __________________________, 1998.
---------------------------------------
Stockholder's Signature
Signature should agree with name printed
herein. If Shares are held in name of
more than one person, EACH joint owner
should sign. Executors, administrators,
trustees, guardians, and attorneys
should indicate the capacity in which
they sign. Attorneys should submit
powers of attorney.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY IN THE STAMPED,
PRE-ADDRESSED ENVELOPE ENCLOSED.