-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hajyqrk7Ji0xdvSctbzlksk1irBIJMN99TUaq8OI/C7v2BKyb32orCI30tHmpIJE s9j+Zdx9VSh0akCu+HFzhg== 0000930661-99-000922.txt : 19990427 0000930661-99-000922.hdr.sgml : 19990427 ACCESSION NUMBER: 0000930661-99-000922 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990526 FILED AS OF DATE: 19990426 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TITAN EXPLORATION INC CENTRAL INDEX KEY: 0001024645 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 752671582 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-21843 FILM NUMBER: 99600352 BUSINESS ADDRESS: STREET 1: 500 W TEXAS AVE STREET 2: STE 500 CITY: MIDLAND STATE: TX ZIP: 79701 BUSINESS PHONE: 9156826612 MAIL ADDRESS: STREET 1: 500 W TEXAS AVE STREET 2: SUITE 500 CITY: MIDLAND STATE: TX ZIP: 79701 DEF 14A 1 DEFINITIVE PROXY STATEMENT =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12 TITAN EXPLORATION, INC. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: ------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------------- (5) Total fee paid: ------------------------------------------------------------------------- [_] Fee paid previously with preliminary materials. [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------------- (3) Filing Party: ------------------------------------------------------------------------- (4) Date Filed: ------------------------------------------------------------------------- TITAN EXPLORATION, INC. 500 West Texas, Suite 200 Midland, Texas 79701 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held on May 26, 1999 To the Stockholders of TITAN EXPLORATION, INC. Notice is hereby given that the annual meeting of stockholders of Titan Exploration, Inc., a Delaware corporation (the "Company"), will be held on Wednesday, May 26, 1999, at 10:00 a.m., local time, in the Midland Room, Tower Two, Fasken Center, 550 West Texas, Midland, Texas 79701 for the following purposes: 1. To elect five directors to serve until the Annual Meeting of Stockholders in 2000; 2. To approve the appointment of KPMG LLP as independent auditors of the Company for the year ending December 31, 1999; and 3. To transact such other business as may properly come before the meeting or any adjournment(s) thereof. Only stockholders of record at the close of business on April 15, 1999 are entitled to notice of, and to vote at, the meeting or any adjournment(s) thereof. You are cordially invited and urged to attend the meeting, but if you are unable to attend, please sign and date the enclosed proxy and return it promptly in the enclosed self-addressed stamped envelope. A prompt response will be appreciated. If you attend the meeting, you may vote in person, if you wish, whether or not you have returned your proxy. In any event, a proxy may be revoked at any time before it is exercised. BY ORDER OF THE BOARD OF DIRECTORS /s/ SUSAN D. ROWLAND SUSAN D. ROWLAND Secretary Midland, Texas April 28, 1999 Titan Exploration, Inc. 500 West Texas, Suite 200 Midland, Texas 79701 PROXY STATEMENT For ANNUAL MEETING OF STOCKHOLDERS To Be Held on May 26, 1999 SOLICITATION OF PROXIES Solicitation and Revocability of Proxies This proxy statement is furnished to holders of Titan Exploration, Inc. ("Titan" or the "Company") common stock, $0.01 par value ("Common Stock"), in connection with the solicitation of proxies on behalf of the Board of Directors of the Company for use at the annual meeting of stockholders of Titan to be held on Wednesday, May 26, 1999, at 10:00 a.m., local time, in the Midland Room, Fasken Center, 550 West Texas, Midland, Texas 79701, and at any adjournment(s) thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. Shares represented by a proxy in the form enclosed, duly signed, dated and returned to the Company and not revoked, will be voted at the meeting in accordance with the directions given, but in the absence of directions to the contrary, such shares will be voted (i) for the election of the Board's nominees for directors, (ii) for the appointment of KPMG LLP as independent auditors of the Company for the year ending December 31, 1999 and (iii) in accordance with the best judgment of the persons voting on any other proposals that may come before the meeting. The Board of Directors knows of no other matters, other than those stated in the foregoing notice, to be presented for consideration at the meeting or any adjournment(s) thereof. If, however, any other matters properly come before the meeting or any adjournment(s) thereof, it is the intention of the persons named in the enclosed proxy to vote such proxy in accordance with their judgment on any such matters. The persons named in the enclosed proxy may also, if it is deemed to be advisable, vote such proxy to adjourn the meeting from time to time. Any stockholder executing and returning a proxy has the power to revoke it at any time before it is voted by delivering to the Secretary of the Company, 500 West Texas, Suite 200, Midland Texas 79701, a written revocation thereof or by duly executing a proxy bearing a later date. Any stockholder attending the annual meeting of stockholders may revoke his proxy by notifying the Secretary at such meeting and voting in person if he desires to do so. Attendance at the annual meeting will not by itself revoke a proxy. The approximate date on which this proxy statement and the form of proxy are first sent to stockholders is April 28, 1999. The cost of soliciting proxies will be borne by the Company. Solicitation may be made, without additional compensation, by directors, officers and regular employees of the Company in person or by mail, telephone or telegram. The Company may also request banking institutions, brokerage firms, custodians, trustees, nominees and fiduciaries to forward solicitation material to the beneficial owners of the Common Stock held of record by such persons, and Titan will reimburse the forwarding expense. All costs of preparing, printing and mailing the form of proxy and the material used in the solicitation thereof will be borne by the Company. Shares Outstanding and Voting Rights The close of business on April 15, 1999 is the record date for determination of stockholders entitled to notice of and to vote at the meeting or any adjournment(s) thereof. The only voting security of the Company outstanding is the Common Stock, each share of which entitles the holder thereof to one vote. At the record date for the meeting, there were outstanding and entitled to be voted 37,934,675 shares of Common Stock. 1 Security Ownership of Certain Beneficial Owners and Management The table below sets forth information concerning (i) the only persons known by the Company, based upon statements filed by such persons pursuant to Section 13(d) or 13(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to own beneficially in excess of 5% of the Common Stock as of April 15, 1999 and (ii) the shares of Common Stock beneficially owned, as of April 15, 1999, by each director of the Company, each executive officer listed in the Summary Compensation Table included elsewhere in this proxy statement, and all executive officers and directors of the Company as a group. Except as indicated, each individual has sole voting power and sole investment power over all shares listed opposite his name.
Shares Beneficially Owned -------------------- Name of Beneficial Owner Number Percent - ------------------------ ---------- -------- Directors and Named Executive Officers (1): Jack D. Hightower (2)......................................... 4,623,359 11.65% George G. Staley (3).......................................... 1,072,197 2.76% William K. White (4).......................................... 3,865 * Rodney L. Woodard (5)......................................... 277,768 * Dan P. Colwell (6)............................................ 263,598 * David R. Albin (7) (8)........................................ 148,906 * Kenneth A. Hersh (7) (9)...................................... 98,258 * William J. Vaughn, Jr. (10)................................... 345,041 * Executive Officers and Directors as a Group (11 persons) (11)... 7,311,476 17.67% Holders of 5% or More Not Named Above Natural Gas Partners II, L.P. (12)............................ 5,000,777 13.18% 777 Main Street, Suite 2250 Forth Worth, Texas 76102 R. Gamble Baldwin (7) (13).................................... 6,247,949 16.47% 1130 Park Avenue New York, New York 10128 Natural Gas Partners, L.P. (14)............................... 6,159,366 16.24% 777 Main Street, Suite 2250 Fort Worth, Texas 76102 Enron Corp. and Joint Energy Development Investment Limited Partnership (15)............................................. 3,423,194 9.02% 1400 Smith Street Houston, Texas 77002 Franklin Resources, Inc. (16)................................. 1,902,060 5.01% 777 Mariners Island Boulevard San Mateo, California 94404 State Street Research & Management Company (17)............... 2,947,023 7.77% One Financial Center, 30th Floor Boston, Massachusetts 02111
- ------------------ * Less than 1%. (1) The business address of each director and executive officer of Titan is c/o Titan Exploration, Inc., 500 West Texas, Suite 200, Midland, Texas 79701. (2) Includes (i) 2,667,588 shares held by Mr. Hightower, (ii) 199,524 shares held by Mr. Hightower's spouse and children and (iii) 1,756,247 shares subject to stock options that are exercisable within 60 days. (3) Includes (i) 199,525 shares held by Mr. Staley and (ii) 872,672 shares subject to stock options that are exercisable within 60 days. (4) Includes (i) 3,000 shares held by Mr. White, (ii) 477 shares subject to stock options that are exercisable within 60 days, and (iii) 388 shares held indirectly through a 401(k) plan. On November 19, 1998, the Company 2 granted Mr. White 200,000 stock options vesting in four equal installments beginning on the first anniversary of the grant date in exchange for the cancellation of 85,000 stock options granted on October 1, 1996 and 20,000 stock options granted on January 1, 1998. (5) Includes (i) 46,556 shares held by Mr. Woodard, (ii) 221,104 shares subject to stock options that are exercisable within 60 days, and (iii) 10,108 shares held indirectly through a 401(k) plan. (6) Includes (i) 46,556 shares held by Mr. Colwell and (ii) 217,042 shares subject to stock options that are exercisable within 60 days. (7) David R. Albin, R. Gamble Baldwin and Kenneth A. Hersh constitute three of the four managers of each of the general partners of Natural Gas Partners II ("NGP II") and NGP Louisiana Partners, L.P. ("NGP -Louisiana"). As such, Messrs. Albin, Baldwin and Hersh may be deemed to share voting and investment power with respect to the 5,000,777 and 357,486 shares of Common Stock beneficially owned by NGP II and NGP - Louisiana, respectively. Messrs. Albin, Baldwin and Hersh disclaim beneficial ownership of such shares, which are not included in the total number of shares reported for each above. (8) Includes (i) 16,567 shares held by Mr. Albin and (ii) 132,339 shares held in trust for the benefit of Mr. Albin. (9) Includes 98,258 shares held by Mr. Hersh. (10) Includes (i) 5,500 shares held by Mr. Vaughn, (ii) 299,287 shares held in trust for Mr. Vaughn and his spouse, and (iii) 40,254 shares held by affiliates of Mr. Vaughn. (11) Includes 3,442,275 shares that officers and directors as a group have the right to acquire within 60 days through the exercise of options granted pursuant to the initial stock option plan and the 1996 incentive plan. (12) Based upon information reported in a Schedule 13G dated February 12, 1997 filed by NGP II, G.F.W. Energy II, L.P. ("GFW II") and GFW II, L.L.C. with the Commission. GFW II, L.L.C., as the sole general partner of GFW II, and GFW II, as the sole general partner of NGP II, may each be deemed to be the beneficial owner of all of the 5,000,777 shares of Common Stock beneficially owned by NGP II. (13) Based upon information reported in an Amendment to Schedule 13G dated October 5, 1998 filed by R. Gamble Baldwin with the Commission. Mr. Baldwin has sole voting and investment power with respect to 88,583 shares of Common Stock he beneficially owns. In addition, Mr. Baldwin may, as the sole general partner of G.F.W. Energy, L.P., the sole general partner of Natural Gas Partners, L.P. ("NGP"), be deemed to be the beneficial owner of all 6,159,366 shares of Common Stock beneficially owned by NGP. (14) Based upon information reported in an Amendment to Schedule 13G dated February 13, 1998 filed by NGP and G.F.W. Energy, L.P. with the Commission. G.F.W. Energy, L.P., as the sole general partner of NGP, may be deemed to be the beneficial owner of all of the 6,159,366 shares of Common Stock beneficially owned by NGP. (15) Based upon information reported in a Schedule 13G dated January 20, 1997 filed by Enron Corp. and Joint Energy Development Investments Limited Partnership ("JEDI") with the Commission. The general partner of JEDI is Enron Capital Management Limited Partnership, whose general partner is Enron Capital Corp., an indirect wholly-owned subsidiary of Enron Corp. (16) Based upon information reported in an Amendment to Schedule 13G dated February 4, 1999 filed by Franklin Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr. and Franklin Advisors, Inc. with the Commission. (17) Based upon information reported in a Form 13G dated February 9, 1999 filed by State Street Research & Management Company. PROPOSAL 1. ELECTION OF DIRECTORS The business and affairs of the Company are managed by and under the direction of the Board of Directors, which exercises all corporate powers of the Company and establishes broad corporate policies. The Board of Directors held four meetings during 1998. The Company's Board of Directors formed a standing compensation committee on October 1, 1996, which is composed of David R. Albin, Kenneth A. Hersh and Jack D. Hightower. Although the Compensation Committee was formed to address all compensation issues, during 1998, the Company's Board of Directors reviewed and approved all matters relating to compensation of executive officers, employee benefit plans and the administration of the Company's stock option programs. 3 The Company's Board of Directors formed a standing audit committee on March 20, 1997, which is composed of David R. Albin, Kenneth A. Hersh and William J. Vaughn, Jr. The Audit Committee's primary responsibilities are to (i) recommend the Company's independent auditors to the Board of Directors, (ii) review with the Company's independent auditors the plan and scope of the auditor's annual audit, the results thereof and the auditors' fees, (iii) review the Company's financial statements and (iv) take such other action as it deems appropriate as to the accuracy and completeness of financial records of the Company and financial information gathering, reporting policies and procedures of the Company. All duly submitted and unrevoked proxies will be voted for the nominees for directors selected by the Board of Directors, except where authorization so to vote is withheld. If any nominee(s) should become unavailable for election for any presently unforeseen reason, the persons designated as proxies will have full discretion to cast votes for another person(s) designated by the Board. The five nominees of the Board of Directors of the Company are named below. Each of the nominees has consented to serve as a director if elected. Set forth below is certain information with respect to the nominees, including information as to each nominee's age as of April 15, 1999, position with the Company, business experience during the past five years and directorships of publicly held companies. Jack D. Hightower, age 50, has served as President, Chief Executive Officer and Chairman of the Board of Directors of the Company since formation of the Company in March 1995. Prior to forming the Company, from 1986 to January 1996, Mr. Hightower served as Chairman of the Board and Chief Executive Officer of United Oil Services, Inc., an oil field service Company serving customers in the Permian Basin. From 1978 to 1995, Mr. Hightower served as Chairman of the Board and President of Amber Energy, Inc., a Company formed to identify oil and gas exploration prospects. From 1991 to 1994, Mr. Hightower served as Chairman of the Board, Chief Executive Officer and President of Enertex, Inc., which served as the operator of record for several oil and gas properties involving Mr. Hightower and other nonoperators, including Selma International Investment Limited. Since 1990, Mr. Hightower has served on the Board of Directors of Chase Bank of Texas, N.A., Midland. Mr. Hightower earned a B.B.A. in Administrative Finance and a B.B.A. in Money, Banking and Investments in 1970, both from Texas Tech University. George G. Staley, age 64, has served as Executive Vice President, Exploration and Director of the Company since its formation. From 1975 until 1995, Mr. Staley served as President and Chief Executive Officer of Staley Gas Co., Inc. and Staley Operating Co., which are oil and gas exploration and operating companies. Mr. Staley earned an M.S. in Geology in 1962 from the University of Arkansas and his undergraduate degree in 1960 from Marshall University. David R. Albin, age 39, has served as a director of the Company since its formation. Since 1988, Mr. Albin has been a Managing Director of Natural Gas Partners ("NGP"). NGP is a family of investment funds organized to make equity investments in oil and gas companies. Prior to founding NGP, Mr. Albin was a partner in the $600 million Bass Investment Limited Partnership ("BILP"), a partnership formed by the Bass family of Fort Worth, Texas. Before joining BILP, he was a member of the oil and gas group in the investment banking division of Goldman, Sachs & Co. Mr. Albin serves as a director of Petroglyph Energy, Inc., and Vista Energy Resources, Inc. Mr. Albin earned a B.S. in Physics in 1981 and his M.B.A. in 1985, both from Stanford University. Kenneth A. Hersh, age 36, has served as a director of the Company since its formation. Since 1989, Mr. Hersh has been a Managing Director of Natural Gas Partners. NGP is a family of investment funds organized to make equity investments in oil and gas companies. Previously, he was employed by the investment banking division of Morgan Stanley & Co. Incorporated where he was a member of the firm's energy group specializing in oil and gas financing and acquisition transactions. Mr. Hersh serves as a director of HS Resources, Inc., Petroglyph Energy, Inc., Pioneer Natural Resources Company, and Vista Energy Resources, Inc. Mr. Hersh earned his M.B.A. from the Stanford University Graduate School of Business and his undergraduate degree from Princeton University. William J. Vaughn, Jr., age 78, has served as director of the Company since March 1997. Since 1975, Mr. Vaughn has served as Chairman of the Board and President of WJV, Inc. and DMV, Inc., which are oil and gas exploration companies. From 1986 to 1996, Mr. Vaughn served as Vice President of United Oil Services, Inc., an oil field service company. From 1975 to 1995, Mr. Vaughn was an independent geologist in association with Mr. Hightower. Mr. Vaughn earned a B.S. in Geology in 1948 from the University of Michigan. 4 Compensation of Directors Fees and Expenses. In 1998, each director who is not an employee of the Company received a fee of $15,000 for serving as a director. The Company also reimburses directors for travel, lodging and related expenses they may incur in attending Board and committee meetings. Compliance with Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the 1934 Act requires directors and officers of the Company, and persons who own more than 10 percent of the Common Stock, to file with the SEC initial reports of ownership and reports of changes in ownership of the Common Stock. Directors, officers and more than 10 percent stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the year ended December 31, 1998, all Section 16(a) filing requirements applicable to its directors, officers and more than 10 percent beneficial owners were met. 5 Compensation of Executive Officers The following table sets forth certain summary information concerning the compensation paid or awarded to the Chief Executive Officer of the Company and the other four most highly compensated executive officers of the Company (collectively, the "named executive officers") for the years indicated. SUMMARY COMPENSATION TABLE
Long Term Compensation Annual Compensation Awards ------------------------------------------ ----------- Shares Name and Other Annual Underlying All Other Principal Position Year Salary Bonus Compensation (1) Options (#) Compensation - --------------------------- ------ -------- ------ --------------- ------------ ------------- Jack D. Hightower................ 1998 $ 246,154 $ 9,231 $ -- 2,612 $ 19,183(2) President and Chief Executive 1997 153,333 48,000 -- -- 12,577 Officer 1996 109,167 12,000 -- 73,103 10,455 George G. Staley................. 1998 $ 190,154 $ 7,077 $ -- 2,003 $ 19,183(3) Executive Vice President, 1997 153,333 32,000 -- -- 15,227 Exploration 1996 109,167 12,000 -- 56,858 15,139 William K. White (4)............. 1998 $ 180,192 $ 6,731 $ -- 116,905(5) 18,980(6) Vice President, Finance and 1997 129,375 27,000 -- -- 10,560 Chief Financial Officer 1996 35,846(7) 500(7) -- 85,000 943 Rodney L. Woodard............... 1998 $ 160,442 $ 5,971 $13,431(8) 1,690 $ 18,980(9) Vice President, Engineering 1997 129,375 27,000 13,431 -- 10,485 1996 97,875 10,800 13,431 24,367 9,442 Dan P. Colwell.................. 1998 $ 160,442 $ 5,971 $ -- 1,690 $ 18,980(10) Vice President, Land 1997 129,375 27,000 -- -- 11,440 1996 79,425 8,640 -- 20,306 9,600
(1) Other Annual Compensation does not include perquisites and other personal benefits if the aggregate amount of such compensation does not exceed the lesser of (i) $50,000 or (ii) 10% of individual combined salary and bonus for the named executive officer in each year. (2) Consists of premiums paid by the Company under a nondiscriminatory group insurance program and contributions by the Company under its 401(k) Retirement Plan of $3,183 and $16,000, respectively, during 1998. (3) Consists of premiums paid by the Company under a nondiscriminatory group insurance program and contributions by the Company under its 401(k) Retirement Plan of $3,183 and $16,000, respectively, during 1998. (4) Mr. White was elected Vice President, Finance and Chief Financial Officer of the Company on September 30, 1996. (5) This amount represents the net effect of the cancellation of 85,000 stock options granted on October 1, 1996, and 20,000 stock options granted on January 1, 1998, and the grant of 200,000 stock options on November 19, 1998. (6) Consists of premiums paid by the Company under a nondiscriminatory group insurance program and contributions by the Company under its 401(k) Retirement Plan of $2,980 and $16,000, respectively, during 1998. (7) Represents amounts earned in 1996 that were paid in 1997. (8) Consists of lease payments made by the Company for an automobile used by Mr. Woodard in connection with his position with the Company. (9) Consists of premiums paid by the Company under a nondiscriminatory group insurance program and contributions by the Company under its 401(k) Retirement Plan of $2,980 and $16,000, respectively, during 1998. (10) Consists of premiums paid by the Company under a nondiscriminatory group insurance program and contributions by the Company under its 401(k) Retirement Plan of $2,980 and $16,000, respectively, during 1998. 6 Option Grants The following table contains information about stock option grants to the named executive officers in 1998: Option/SAR Grants in Last Fiscal Year
Potential realizable value at assumed annual rates of stock price appreciation for Individual Grants option term - ------------------------------------------------------------------------------ ---------------------- Number of Percent of securities total options/ underlying SARs granted Options/ to employees Exercise or Expir- SARs granted in fiscal base price ation Name (#) year(1) ($/Sh) date 5% ($) 10% ($) - -------------------- ------------ -------------- ----------- -------- ------- ------- Jack D. Hightower...... 2,612 0.67% $ 9.19 01/01/03 -- 1,094 George G. Staley....... 2,003 0.51% $ 9.19 01/01/03 -- 839 William K. White....... 20,000 n/a(2) $11.63 n/a n/a n/a 1,905 0.49% $ 9.19 01/01/03 -- 798 200,000 51.35% $ 6.25 11/19/03 416,000 841,800 Rodney L. Woodward..... 1,690 0.43% $ 9.19 01/01/03 -- 708 Dan P. Colwell......... 1,690 0.43% $ 9.19 01/01/03 -- 708
(1) The total number of options granted to employees in 1998 used to calculate these percentages does not include the 20,000 stock options granted to Mr. White on January 1, 1998, that were subsequently canceled on November 19, 1998. (2) These stock options and the 85,000 stock options previously granted on October 1, 1996, were canceled on November 19, 1998. Option Exercises and Year-End Option Values The following table provides information about the number of shares issued upon option exercises by the named executive officers during 1998, and the value realized by the named executive officers. The table also provides information about the number and value of options that were held by the named executive officers at December 31, 1998. Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
Number of Securities Value of Unexercised Underlying Unexercise In-the-Money Options Options at FY-End (#) at FY-End ($) Acquired on Value -------------------------- ------------- ------------------ Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable - ------------------- ------------ ------------ ----------- ------------- ------------- --------------- (dollars in thousands) Jack D. Hightower...... -- -- 1,554,672 203,534 6,970 901 George G. Staley....... 160,000 859,120 755,086 119,088 3,385 525 William K. White....... -- -- -- 201,905 -- 63 Rodney L. Woodard...... -- -- 196,566 25,805 881 108 Dan P. Colwell......... -- -- 192,676 25,633 864 107
7 Report of the Board of Directors on Executive Compensation Policy To the Stockholders of Titan Exploration, Inc.: As members of the Board of Directors, it is our responsibility to review and set the compensation levels of the Company's Chief Executive Officer ("CEO") and other executives, evaluate the performance of management and consider management succession and related matters. In addition, we administer the annual and long-term incentive compensation plans of the Company. The Board of Directors considers information with respect to the reasonableness of compensation paid to senior officers of the Company, as well as all employees of the Company and its subsidiaries in managerial positions. The Board of Directors also takes into account how compensation compares to compensation paid by competitors in the Company's industry as well as the performance of the Company. Compensation Policies and Programs The Company's executive compensation policy is designed to attract, motivate, reward and retain the key executive talent necessary to achieve the Company's business objectives and contribute to the long-term success of the Company. In order to meet these goals, the Company's compensation policy for its executive officers focuses primarily on determining appropriate salary levels and providing long-term stock-based incentives. To a lesser extent, the Company's compensation policy also contemplates performance-based cash bonuses. The Company's compensation principles for the Chief Executive Officer are identical to those of the Company's other executive officers. The executive compensation program for 1998 consisted of three elements: base salary, annual incentive bonus and equity compensation. Base Salary. Base salary for executive officers is determined principally by competitive factors and the marketplace. In determining its recommendations for adjustments to officers' base salaries for fiscal 1998, the Company focused primarily on the scope of each officer's responsibilities, each officer's contributions to the Company's success in moving toward its long-term goals during the fiscal year, the integration of the Company's acquisitions of Offshore Energy Development Corporation, Carrollton Resources, L.L.C. and properties from Pioneer Natural Resources Company, the Company's assessment of the quality of services rendered by the officer, comparison with compensation for officers of comparable companies and an appraisal of the Company's financial position. Annual Incentive Bonus. The compensation policy of the Company is that a part of the annual compensation of each officer be related to and contingent upon the performance of the Company, as well as the individual contribution of each officer. In addition, the Board of Directors has reviewed compensation information for executives of companies comparable to the Company in an effort to ensure that the Company's bonuses are competitive. Equity Compensation. The grant of stock options to executive officers constitutes an important element of long-term compensation for the executive officers. The grant of stock options increases management's equity ownership in the Company with the goal of ensuring that the interests of management remain closely aligned with those of the Company's stockholders. The Board believes that stock options in the Company provide a direct link between executive compensation and stockholder value. By attaching vesting requirements, stock options also create an incentive for executive officers to remain with the Company for the long term. Chief Executive Officer Compensation As indicated above, the factors and criteria upon which the compensation of Jack D. Hightower, the Chief Executive Officer, is based are identical to the criteria used in evaluating the compensation packages of the other executive officers of the Company. The Chief Executive Officer's individual contributions to the Company included his leadership role in establishing and retaining a strong management team, developing and implementing the Company's business plans and attracting investment capital to the Company. In addition, the Company reviewed compensation levels of chief executive officers at comparable companies in the Company's industry. In December 1997, 8 the Committee approved an increase in salary for the CEO to $240,000 per year, based upon competitive and financial factors. Summary The members of the Committee believe that linking executive compensation to corporate performance results in a better alignment of compensation with corporate goals and stockholder interests. As performance goals are met or exceeded, resulting in increased value to stockholders, executive officers are to be rewarded commensurately. The members of the Committee believe that compensation levels during 1998 adequately reflect the compensation goals and policies of the Company. March 30, 1999 BOARD OF DIRECTORS Jack D. Hightower, Chairman George G. Staley David R. Albin Kenneth A. Hersh William J. Vaughn, Jr. Section 162(m) of the Internal Revenue Code. Section 162(m) of the Internal Revenue Code of 1986, as amended, generally limits (to $1 million per covered executive) the deductibility for federal income tax purposes of annual compensation paid to a Company's chief executive officer and each of its other four most highly compensated executive officers. All options granted under the Company's Long-term Incentive Plan in 1996 will qualify for an exemption from the application of Section 162(m) of the Code, thereby preserving the deductibility for federal income tax purposes of compensation that may be attributable to the exercise of such options. Confidentiality and Non-Competition Agreements Each of the executive officers of the Company is a party to a confidentiality and noncompete agreement with the Company. Option Repricing The following report is provided to stockholders by the members of the Compensation Committee of the Board of Directors. The Compensation Committee grants stock options with the goals of ensuring that the interests of management remain closely aligned with those of the Company's stockholders and creating an incentive for executive officers to remain with the Company for the long term. In order to further such goals, the Compensation Committee may, when it deems it necessary, adjust the exercise price on previously granted options so that the new exercise price would more closely approximate the market price, and therefore, provide greater incentive for the executive officers and employees. Consequently, on November 19, 1998, the Compensation Committee exchanged options granted to William K. White on October 1, 1996 and January 1, 1998 with exercise prices of $11.00 and $11.63, respectively, for options with an exercise price of $6.25. 9 The following table sets forth certain information concerning option repricing activity for repriced options held by any executive officer since December 16, 1996, the date of the Company's initial public offering. Ten-Year Option/SAR Repricings
Securities Length of underlying original option number of Market price of Exercise price term remaining options/SARs stock at time of at time of at date of repriced or repricing or repricing or New exercise repricing or Name Date amended (#) amendment ($) amendment ($) price ($) amendment - ------------------ -------- ------------- ----------------- --------------- ------------- --------------- William K. White 11/19/98 85,000 $6.25 $11.00 $6.25 2.86 years William K. White 11/19/98 20,000 $6.25 $11.63 $6.25 4.14 years
Compensation Committee Interlocks and Insider Participation In addition to being a member of the Compensation Committee, Mr. Hightower also served as the President and Chief Executive Officer of the Company. In connection with the acquisition of Offshore Energy Development Corporation ("OEDC") and Carrollton Resources L.L.C. ("Carrollton"), NGP agreed to terminate its rights under (i) the Registration Rights Agreement among OEDC, NGP and certain other stockholders of OEDC and (ii) the Registration Rights Agreement among Carrollton, NGP and certain other stockholders, in exchange for the Company's agreement to use its best efforts to prepare, file and have declared effective within 180 days of consummation of the OEDC Acquisition a shelf registration statement registering for resale the 1,391,959 shares of Common Stock received by NGP in the OEDC acquisition and 357,486 shares of Common Stock received by NGP in the Carrollton acquisition. The Company has also agreed to include in the same shelf registration an aggregate of 86,088 shares of Common Stock that Messrs. Albin, Baldwin and Hersh received in the OEDC acquisition. The Company is party to the Amended and Restated Registration Rights Agreement with NGP, NGP II, Jack D. Hightower, Joint Energy Development Investments Limited Partnership, First Union Corporation and Selma International Investment Limited (the "Shareholder Parties"). Pursuant to the agreement, on three separate occasions, commencing on the 180th day following the date of the Company's initial public offering under the securities laws, Shareholder Parties owning at least 35% of the outstanding shares then subject to such agreement may require the Company to register shares held by them under applicable securities laws, provided that the shares to be registered have an estimated aggregate offering price to the public of at least $3,000,000. The agreement also provides that the Shareholder Parties have piggyback registration rights pursuant to which such persons may include shares of the Company Common Stock held by them in certain registrations initiated by the Company or by any other holder of the Company's Common Stock. The piggyback rights are subject to customary cutback provisions. Pursuant to the above agreements, the Company has registered the shares of Common Stock held by NGP and NGP II. Messrs. Hightower, Staley and Vaughn and certain of their affiliates have common ownership interests in wells operated by the Company and, in accordance with a standard industry operating agreement, Messrs. Hightower, Staley and Vaughn and certain of their affiliates make payments to the Company of leasehold costs and lease operating and supervision charges. These payments aggregated approximately $43,019 for the year ended December 31, 1998. Revenue received in connection with these wells was approximately $12,350 for the year ended December 31, 1998. The fees charged by the Company to Messrs. Hightower, Staley and Vaughn are the same as those charged to unaffiliated third parties that are also party to the operating agreement. The Company's offices are in Fasken Center located at 500 West Texas, Suite 200, in Midland, Texas and are leased from Fasken Center Ltd., an affiliate of Mr. Hightower. The lease is a noncancellable operating lease that terminates on March 15, 2002 and requires monthly rent payments of approximately $36,000, subject to increase as the Company assumes additional space. 10 Certain Transactions In connection with the acquisition of OEDC and Carrollton, NGP agreed to terminate its rights under (i) the Registration Rights Agreement among OEDC, NGP and certain other stockholders of OEDC and (ii) the Registration Rights Agreement among Carrollton, NGP and certain other stockholders, in exchange for the Company's agreement to use its best efforts to prepare, file and have declared effective within 180 days of consummation of the OEDC acquisition a shelf registration statement registering for resale the 1,391,959 shares of Common Stock received by NGP in the OEDC acquisition and 357,486 shares of Common Stock received by NGP-Louisiana in the Carrollton acquisition. The Company has also agreed to include in the same shelf registration an aggregate of 86,088 shares of Common Stock that Messrs. Albin, Baldwin and Hersh received in the OEDC Acquisition. The Company is party to the Amended and Restated Registration Rights Agreement with the Shareholder Parties. Pursuant to the agreement, on three separate occasions, commencing on the 180th day following the date off the Company's initial public offering under the securities laws, Shareholder Parties owning at least 35% of the outstanding shares then subject to such agreement may require the Company to register shares held by them under applicable securities laws, provided that the shares to be registered have an estimated aggregate offering price to the public of at least $3,000,000. The agreement also provides that the Shareholder Parties have piggyback registration rights pursuant to which such persons may include shares of Common Stock held by them in certain registrations initiated by the Company or by any other holder of Common Stock. The piggyback rights are subject to customary cutback provisions. Pursuant to the above agreements, the Company has registered the shares of Common Stock held by NGP and NGP II. The Company has entered into an administrative services contract with Staley Operating Co. ("Staley Operating"), an affiliate of Mr. Staley. Pursuant to the agreement, the Company provided certain administrative, accounting and other office and technical services on behalf of Staley Operating, in its capacity as the operator of certain producing oil and gas properties, in return for which the Company received the amounts charged by Staley Operating for providing such services under the applicable operating agreements for such properties. The total amount of payments received by the Company under such agreement was approximately $7,500 for the year ended December 31, 1998. Messrs. Hightower, Staley and Vaughn and certain of their affiliates have common ownership interests in wells operated by the Company and, in accordance with a standard industry operating agreement, Messrs. Hightower, Staley and Vaughn and certain of their affiliates make payments to the Company of leasehold costs and lease operating and supervision charges. These payments aggregated approximately $43,019 for the year ended December 31, 1998. Revenue received in connection with these wells was approximately $12,350 for the year ended December 31, 1998. The fees charged by the Company to Messrs. Hightower, Staley and Vaughn are the same as those charged to unaffiliated third parties that are also party to the operating agreement. From time to time, the Company enters into certain hedging arrangements with Enron Capital & Trade Resources Corp. ("ECTRC"), an affiliate of JEDI. Pursuant to the terms of such arrangements relating to hedges, during the year ended December 31, 1998, the Company received approximately $2,232,000 from ECTRC. For the year ended December 31, 1998, sales to Enron Corp. (an affiliate of JEDI), its subsidiaries and affiliates were approximately 31%, of the Company's oil and gas revenues. The Company's offices are in Fasken Center located at 500 West Texas, Suite 200, in Midland, Texas and are leased from Fasken Center Ltd., an affiliate of Mr. Hightower. The lease is a noncancellable operating lease that terminates on March 15, 2002 and requires monthly rent payments of approximately $36,000, subject to increase as the Company assumes additional space. 11 Performance Graph The following graph shows a comparison of cumulative total stockholder returns for the Common Stock of the Company, the Standard & Poor's 500 Index and the composite peer group since December 17, 1996. [PERFORMANCE GRAPH APPEARS HERE] COMPARISON OF CUMULATIVE STOCKHOLDER TOTAL RETURN (1) AMONG THE COMPANY, S&P 500 INDEX AND COMPOSITE PEER GROUP
December 17, 1996 December 31, 1996 December 31, 1997 December 31, 1998 ----------------- ----------------- ----------------- ----------------- Titan............ 100 109 86 60 S&P 500 Index.... 100 102 136 175 Peer Group (2)... 100 105 93 49
(1) Total return assuming reinvestment of dividends. Assumes $100 invested on December 17, 1996 in Common Stock of Titan, the Standard & Poor's 500 Index and the composite peer group. (2) The Company maintains as its peer group the companies that comprise the John S. Herold Midsize Exploration and Production Companies, of which the Company is a member. This composite peer group includes the following companies: Belco Oil & Gas Corp., Berry Petroleum Co., Chesapeake Energy Corp., Coho Energy Inc., Cross Timbers Oil Co., Eex Corp., Forest Oil Corp., Helmerich & Payne, Inc., Houston Exploration Co., Howell Corp., KCS Energy, Inc., Kelley Oil & Gas Corp., Newfield Exploration Co., Patina Oil & Gas Corp., Snyder Oil Corp., Stone Energy Corp., Swift Energy Co., Titan Exploration, Inc., Tom Brown, Inc., TransTexas Gas Corp., and Wiser Oil Company. 12 PROPOSAL 2. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS The Board of Directors has appointed, and recommends the approval of the appointment of, KPMG LLP, who have been the Company's auditors since the Company's formation on September 30, 1996, as independent auditors for the year ending December 31, 1999. Representatives of KPMG LLP are expected to be present at the Annual Meeting and will be given the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions. Unless stockholders specify otherwise in the proxy, proxies solicited by the Board of Directors will be voted by the persons named in the proxy at the Annual Meeting to ratify the selection of KPMG LLP as the Company's auditors for 1999. The affirmative vote of a majority of the votes cast at the Annual Meeting will be required for ratification. The Board of Directors recommends that stockholders vote FOR the ratification of the appointment of KPMG LLP. Other Matters The Board of Directors of the Company does not intend to present any other matters at the meeting and knows of no other matters which will be presented. However, if any other matters come before the meeting, it is the intention of the persons named in the enclosed proxy to vote in accordance with their judgment on such matters. Stockholder Proposals It is contemplated that the 2000 annual meeting of stockholders of the Company will take place during the fourth week of May 2000. Stockholder proposals for inclusion in the Company's proxy materials for the 2000 annual meeting of stockholders must be received at the Company's principal executive office in Midland, Texas, addressed to the Secretary of the Company, not less than 120 days prior to such meeting; provided that if the 2000 annual meeting of stockholders is changed by more than 30 days from the presently contemplated date, proposals must be so received a reasonable time in advance of the meeting. With respect to shareholder proposals which are not intended to be included in the Company's proxy statement, the Bylaws of the Company provide that notice for business to be properly brought before a meeting of the stockholders must be filed with the Secretary of the Company not less than 60 nor more than 120 days prior to the meeting. Form 10-K Annual Report The Company will provide without charge to each person from whom a proxy is solicited by this proxy statement, upon the written request of any such person, a copy of the Company's annual report on Form 10-K, including the financial statements and the schedules thereto, required to be filed with the Securities and Exchange Commission pursuant to Section 13(a)-1 under the 1934 Act for the Company's most recent fiscal year. Requests should be directed to the Vice President, Administration and Secretary, Titan Exploration, Inc., 500 West Texas, Suite 200, Midland, Texas 79701. By Order of the Board of Directors /s/ SUSAN D. ROWLAND Susan D. Rowland, Secretary April 28, 1999 Midland, Texas 13 . FOLD AND DETACH HERE . --------------------------------------------------------------------------- TITAN EXPLORATION, INC 500 West Texas, Suite 200 Midland, Texas 79701 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Jack D. Hightower and William K. White, and each of them, as the undersigned's attorneys and proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as directed below, all the shares of common stock of TITAN EXPLORATION, INC. (the "Company") held of record by the undersigned on April 15, 1999, at the annual meeting of Stockholders of the Company to be held on May 26, 1999, at 10:00 a.m., local time, in the Midland Room, Tower Two, Fasken Center, 550 West Texas, Midland, Texas 79701, and at any adjournment(s) thereof. 1. ELECTION OF DIRECTORS: [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote (except as marked to the contrary for all nominees listed below) below (INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line through the nominee's name below.) Jack D. Hightower George G. Staley David R. Albin Kenneth A. Hersh William J. Vaughn 2. PROPOSAL TO RATIFY APPOINTMENT OF KPMG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999. [ ] FOR [ ]AGAINST [ ]ABSTAIN 3. In their discretion, the proxies are authorized to vote with respect to any other matter which may properly come before the meeting or any adjournment(s) thereof. (continued on other side) . FOLD AND DETACH HERE . - -------------------------------------------------------------------------------- THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR MANAGEMENT'S NOMINEES FOR ELECTION AS DIRECTORS AND FOR THE APPOINTMENT OF KPMG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999. Dated: , 1999 ---------------------------------- ---------------------------------------------- Signature ---------------------------------------------- Signature Please sign exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. -----END PRIVACY-ENHANCED MESSAGE-----