UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
(Amendment
No. 1)
þ
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
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|
For
the Fiscal Year Ended December 31, 2008
OR
p
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
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Commission
File Number 0-9120
TXCO
Resources Inc.
(Exact
name of Registrant as specified in its charter)
Delaware
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84-0793089
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(State
or other jurisdiction of
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(I.R.S.
Employer
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incorporation
or organization)
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Identification
No.)
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777
E. Sonterra Blvd., Suite 350; San Antonio, Texas
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78258
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
telephone number, including area code:
(210) 496-5300
Securities
registered pursuant to Section 12(b) of the
Act:
Title
of each class
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Name
of each exchange on which registered
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Common
Stock par value $0.01 per share
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NASDAQ Global Select
Market
SM
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Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
þ
No
p
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceeding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes
p
No
p
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
p
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large
accelerated filer
p
|
Accelerated filer
þ
|
Non-accelerated
filer
p
(Do not check if a smaller reporting company)
|
Smaller-reporting
company
p
|
Indicate by check mark if the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
p
No
þ
The
aggregate market value of the Registrant's Common Stock held by non-affiliates
on June 30, 2008 (the last business day of the Registrant's most recently
completed second fiscal quarter) was approximately $396.4 million, based on
the $11.76 per share closing price as reported on the NASDAQ Global Select
Market.
The
number of shares outstanding of the registrant's Common Stock as of March 13,
2009, was 38,691,241.
Documents
Incorporated by Reference: None.
TXCO
RESOURCES INC.
ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
EXPLANATORY
NOTE
Pursuant
to General Instruction G to Form 10-K, this Amendment No. 1 on Form 10-K/A
(this "Amendment No. 1") amends our Annual Report on Form 10-K for the
fiscal year ended December 31, 2008, originally filed with the U.S.
Securities and Exchange Commission on March 16, 2009 (the "Original Filing"). We
are filing this Amendment No. 1 for the sole purpose of including information in
Part III, Items 10 through 14, because the definitive Proxy Statement
for our 2009 Annual Meeting of Shareholders will not be filed with the SEC
within 120 days after the end of our 2008 fiscal year. The reference
on the cover of the Original Filing to the incorporation by reference to
portions of our definitive Proxy Statement into Part III of the Original Filing
is hereby deleted.
In
accordance with Rule 12b-15 under the Exchange Act, Part III, Items 10 through
14 of the Original Filing have been amended and restated in their entirety, and
Part IV, Item 15 of the Original Filing has been amended and restated
solely to include as exhibits the new certifications required by Rule 13a-14(a)
under the Exchange Act. This Amendment No. 1 does not amend or otherwise
update any other information in the Original Filing. Accordingly, this Amendment
No. 1 should be read in conjunction with the Original Filing and with our
filings with the SEC subsequent to the Original Filing. The Original Filing
continues to speak as of the date of the Original Filing and we have not updated
the disclosures contained therein to reflect any events which have occurred at a
date subsequent to the filing of the Original Filing.
INDEX
Form
10-K Item Number:
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Page
No.
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PART III
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3
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Item 10.
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3
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Item 11.
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7
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Item 12.
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23
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Item 13.
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27
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Item 14.
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28
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PART IV
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29
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Item 15.
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29
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31
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PART
III
Item
10. Directors, Executive Officers and Corporate
Governance
Board
Composition
As of
March 31, 2009, the Board of Directors was composed of seven members,
divided into three classes as follows:
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Term
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Governance
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Expiring
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Audit
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Compensation
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and
Nominating
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Name
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Age
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Class
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In
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Committee
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Committee
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Committee
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*
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Alan
L. Edgar
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63
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B
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2009
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*
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*
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*
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*
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Dennis
B. Fitzpatrick
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65
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A
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2011
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**
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*
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*
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Jon
Michael Muckleroy
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78
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B
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2009
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**
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*
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*
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Michael
J. Pint
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65
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C
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2010
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*
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**
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*
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Jacob
Roorda
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51
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A
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2011
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*
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*
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**
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James
E. Sigmon
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60
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C
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2010
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*
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Anthony
Tripodo
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56
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A
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2011
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*
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*
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*
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Member
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**
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Chairperson
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Alan L.
Edgar has been involved in energy-related investment banking and equity analysis
for more than 35 years. Since 1998, Mr. Edgar has served as Chairman
of Cochise Capital, a privately held investment bank based in Dallas, Texas,
specializing in energy-related mergers and acquisitions and equity and debt
financing. Mr. Edgar's previous energy investment banking experience
includes serving as Corporate and Research Director of Schneider, Bernet &
Hickman, Inc. (Thompson, McKinnon) from 1972 through 1986, Managing Director of
the Energy Group of Prudential-Bache Capital Funding from 1987 to 1990, and
Managing Director and Co-Head of the Energy Group of Donaldson, Lufkin &
Jenrette Securities, Inc. from 1990 to 1997. Mr. Edgar serves as a
Director of Marion Energy Limited (AU: MAE). Mr. Edgar earned an
economics degree from Monash University in Melbourne, Australia, and an MBA from
Southern Methodist University. Mr. Edgar has served as a director of the Company
since 2000.
Dennis B.
Fitzpatrick is the Chairman, CEO and Director of D.B. Fitzpatrick & Co.,
Inc., an asset management firm based in Boise, Idaho, and has served in that
role since 1984. Prior to organizing D.B. Fitzpatrick & Co.,
Inc., Mr. Fitzpatrick taught corporate finance courses as a faculty member at
the University of Idaho, Boise State University and the University of
Colorado. He is a chartered financial analyst and has been a
financial consultant to several companies. Mr. Fitzpatrick holds a
doctorate in finance and a bachelor's degree in applied mathematics from the
University of Colorado and an MBA from the University of Santa Clara. Mr.
Fitzpatrick has served as a director of the Company since 2005.
Jon
Michael Muckleroy offers more than 50 years of business experience, including
extensive experience in energy-related industries. Mr. Muckleroy held
management positions with Florida Gas Company, Saxon Oil Company and Houston
Liquid Fuels, and has been an advisor to several exploration and production
companies. He served as Chairman and CEO of Enron Liquid Fuels from
1985 to 1993. Mr. Muckleroy was a Director of EXCO Resources, a
public company involved in the acquisition, development and exploitation of oil
and natural gas properties from 2002 to 2004. In 2006, Mr. Muckleroy
took the position of CEO of M & M Energy, which is involved in creating an
energy research park. In June 2008, Mr. Muckleroy took the position
of Chief Executive Officer of Millenium E&P Resource Fund I, LLC. He remains
involved in management of a substantial family portfolio of oil and gas
investments through M.P. Phoenix Holding, Ltd. and D.S. Family Partnership. Mr.
Muckleroy holds a bachelor's degree in marketing and finance from Southern
Methodist University. Mr. Muckleroy has served as a director of the Company
since 2005.
Michael
J. Pint is a business investor with more than 40 years of banking experience,
including a four-year term as Commissioner of Banks of Minnesota and Chairman of
the Minnesota Commerce Commission. From 1966 to 1983, Mr. Pint was
with the Federal Reserve Bank of Minneapolis, Minnesota, and at the time of his
departure was serving as its Senior Vice President and Chief Financial
Officer. Since 1983, Mr. Pint has served in the capacity of Chairman,
President or Director of 40 different banks and bank holding companies
throughout the United States. Recently, Mr. Pint was the owner of
Valley Bank of Arizona, located in Phoenix, Arizona, until it was sold in
2003. He currently serves as Chairman of the Board of Intrastate,
Inc.; Chairman of the Board of Airport, Town & Yellow Taxis; and Director of
Penchant Software, all private companies. Mr. Pint has a bachelor's
degree in Finance from the University of Northern Iowa and studied at Rutgers
University Stonier Graduate School of Banking. Mr. Pint has served as a director
of the Company since 1997.
Jacob
Roorda is President, CEO and a Director of Canoe Financial Corp. of Calgary,
Alberta, which manages the EnerVest group of investment funds. He joined Canoe
in August 2008. Previously he was Vice President, Corporate of Harvest Energy
Trust, a publicly traded oil and natural gas royalty trust based in
Calgary. Mr. Roorda was a member of the founding group and President
of Harvest Energy from July 2002 until February 2006, when it merged with
another royalty trust. Prior to joining Harvest Energy, he held the
position of Managing Director and was a member of the board of directors of
Research Capital Corporation, an investment banking firm, from 1999 to
2002. Mr. Roorda co-founded PrimeWest Energy Trust in January 1996
and served on the board of directors and as Vice President, Corporate until
1999. From 1991 to 1996, Mr. Roorda was Manager, Business Development
at Fletcher Challenge Petroleum Inc. From 1987 to 1991, Mr. Roorda
was a Vice President in the equity research group and was a ranked oil and
natural gas analyst at BZW Canada Ltd. in Toronto (a subsidiary of Barclays
Bank). Prior to joining BZW Canada Ltd., Mr. Roorda held a number of
senior engineering positions with Dome Petroleum Ltd. He is one of
the founding shareholders and currently serves on the board of directors of
North Peace Energy Corp., a publicly traded oil exploration and production
company. Mr. Roorda also serves on the board of directors of Argosy
Energy, Inc., a publicly traded company focused on the acquisition, exploration
and development of oil and natural gas in Western Canada. Mr. Roorda is a
Professional Engineer and holds a Bachelor of Applied Science (Eng.) degree from
Queen's University, Kingston, Ontario, and an MBA from the University of
Calgary. Mr. Roorda has served as a director of the Company since
2008.
James E.
Sigmon has served as the Company's Chief Executive Officer since February 1985
and also from July 1984 to October 1984. He served as President of
the Company from July 1984 until June 2008. Mr. Sigmon has served as a Director
of the Company since 1984 and in December 2006 he was elected Chairman of the
Board. As an engineer, Mr. Sigmon has been active for more than 35
years in the exploration and development of oil and gas
properties. Prior to joining the Company, he was an engineer with
Halliburton Co. and he served in the management of Retamco Properties, a private
oil and gas exploration company, based in San Antonio, Texas, that was active in
drilling wells in South Texas. He served as a Director of ExproFuels,
Inc., a former subsidiary of the Company, from 1994 to 1998. Mr.
Sigmon received his Bachelor of Science degree in electrical engineering from
the University of Texas at Arlington.
Anthony
Tripodo is Executive Vice President and Chief Financial Officer of Helix Energy
Solutions Group, Inc. ("Helix"), of Houston, Texas, a public oilfield service
company. Before joining Helix as an officer in June 2008, he was the
Executive Vice President and Chief Financial Officer of Tesco Corporation, a
public company involved in the design, manufacture and service delivery of
innovative drilling technology for the upstream energy
industry. Prior to joining Tesco Corporation in January 2007, Mr.
Tripodo founded Arch Creek Advisors LLC, an investment banking firm specializing
in capital formation and M&A advisory services for the oil and gas industry,
in 2003. From 1997 to 2003, he served as Executive Vice President of
Veritas DGC, a geophyscial services provider to the energy
industry. Prior to joining Helix as an officer, Mr. Tripodo served on
its board of directors, where he also served as chairman of the audit committee
and a member of the governance committee. He previously served on the board of
directors and the audit committee of Petroleum Geo-Services ASA, a publicly
traded oilfield services firm, and on the board of directors of Vetco
International Ltd., a privately owned oilfield service company based in London,
where he also served as chairman of the audit and compliance committees. Mr.
Tripodo earned his Bachelor of Arts degree in Business at St. Thomas University
in Miami, Florida. Mr. Tripodo has served as a director of the Company since
2008.
Executive
Officers
The
following table sets forth the name, age, and position of each of our executive
officers as of March 31, 2009:
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James
E. Sigmon
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60
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Chief
Executive Officer
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Gary
S. Grinsfelder
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59
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President
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P.
Mark Stark
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54
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Vice
President, Treasurer and Chief Financial Officer
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James
J. Bookout
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47
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Vice
President and Chief Operating Officer
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M.
Frank Russell
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60
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Vice
President, Secretary and General Counsel
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Roberto
R. Thomae
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58
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Vice
President - Capital Markets
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Richard
A. Sartor
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56
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Controller
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Information on Mr. Sigmon's service to
TXCO and prior experience is included above in the
Board
Composition
section of
this Item.
Mr.
Grinsfelder was named the Company's President in June 2008, responsible for
land, exploration, legal and investor relations and corporate communications
functions. He joined TXCO as Vice President - Exploration following TXCO's
acquisition of Output Exploration LLC in April 2007. Prior to April 2007, he was
Executive Vice President of Exploration and Business Development for Output
Exploration, LLC. A geologist with more than 30 years of oil and gas industry
experience, he was Vice President of Exploration for Triad Energy before joining
Output Exploration, LLC in 1994. Previously, he was with Union Oil Company of
California, American Petrofina and Spartan Petroleum Corporation. Mr.
Grinsfelder serves as a Director of Royale Energy, Inc. (Nasdaq: ROYL). He holds
a Bachelor of Science in Geology from Southern Methodist University, and pursued
graduate studies at the University of Puerto Rico and University of
Houston.
Mr. Stark
has served as the Company's Vice President, Treasurer and Chief Financial
Officer since June 2003. He is responsible for all accounting, finance and
treasury functions for the Company and its subsidiaries. Mr. Stark has more than
25 years of corporate financial experience with an emphasis in the natural
resources and agribusiness industries. He previously served as Chief
Financial Officer of Alamo Water Refiners, Inc., Dawson Production Services Inc.
(NYSE: DPS), and Venus Exploration Inc. (NASDAQ: VFNX), before joining the
Company. He received a Bachelor of Business Administration from the University
of Texas at Austin and a MBA from Southern Methodist University.
Mr.
Bookout, P.E., has served as the Company's Vice President and Chief Operating
Officer since June 2003. Mr. Bookout joined the Company in 2002 as Operations
Manager. He is responsible for all of the Company's exploration, drilling and
production functions. Mr. Bookout has more than 25 years experience
in exploration and production operations, serving in operation positions with
such firms as Pioneer Natural Resources USA Inc. (NYSE: PXD) as Senior
Operations Engineer, Abraxas Petroleum Corp. (AMEX:ABP) as Senior Operations
Engineer, Network International as Engineering/Marketing Manager, and Venus
Exploration Inc. (NASDAQ: VFNX) as Operations Manager. He received a Bachelor of
Science degree in petroleum engineering from Texas A&M
University.
Mr.
Russell has served as the Company's Vice President and General Counsel since
March 2006, and as Secretary since June 2008. He is responsible for all
corporate legal matters of the Company and its subsidiaries, including
acquisitions, regulatory, contracts and litigation. He has more than 30 years of
legal experience with an emphasis on the energy industry and corporate law,
including 22 years as lead outside counsel to the Company. He joined the Company
from Barton, Schneider, Russell & East L.L.P., a San Antonio-based law firm,
where he was Managing Partner. Mr. Russell received Bachelor of Arts and Doctor
of Jurisprudence degrees from the University of Texas at Austin.
Mr.
Thomae has served as the Company's Vice President of Capital Markets since June
2003. He is responsible for the Company's financial market and investment
community contacts, investor relations and corporate communications. Mr. Thomae
has more than 30 years of corporate financial experience with an emphasis in the
management of public and private oil and gas exploration companies, including
audit and tax advisory services while employed with several international public
accounting firms. He served as the Company's Corporate Secretary from March 1997
until June 2008. He served as the Company's Chief Financial Officer, Treasurer
and Vice President-Finance from September 1996 through June 2003. From September
1995 through September 1996 he was a consultant to the Company in a financial
management capacity. From 1989 through 1995, Mr. Thomae was self-employed as a
management consultant primarily involved in the development of domestic and
international oil and gas exploration projects and the marketing of refined
products. He received a Bachelor of Business Administration degree in
accounting
from the
University of Texas at Austin.
Mr.
Sartor has served as the Company's Controller since April 1997. He
has nearly 30 years of accounting and energy industry experience. A Certified
Public Accountant since 1980, Mr. Sartor operated a private accounting practice
from 1989 to 1997 and has been with such companies as Tesoro Petroleum, Gulf
Energy & Development and Hondo Oil & Gas. Mr. Sartor received a Bachelor
of Business Administration degree from the University of Texas at Austin and an
MBA from the University of Texas at San Antonio.
Each
director and executive officer has agreed to be named in this Amendment No. 1
and to serve in the capacities indicated.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires TXCO's directors,
officers, and beneficial holders of more than 10% of a registered class of
TXCO's equity securities to file with the SEC initial reports of ownership and
reports of changes in ownership of common stock and other equity securities of
the Company. To our knowledge, based solely on a review of such reports or
written representations received from such persons, all of our current
directors, officers, and beneficial holders of more than 10% of the Company's
stock complied with all of the Section 16(a) reporting requirements
applicable to them with respect to transactions during fiscal year
2008.
Code
of Conduct and Code of Ethics
TXCO's
Board of Directors has adopted a Code of Ethics that applies to its Chief
Executive Officer, Chief Financial Officer, principal accounting officer, and
controller (or persons performing similar functions) and a Code of Conduct that
applies to all directors, officers, and employees of the Company. A copy of each
is available on the Investor Relations section of TXCO's website at
www.txco.com. We intend
to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding an
amendment to, or waiver from, a provision of either Code by posting such
information on the Investor Relations section of TXCO's website.
Audit
Committee
The Board
of Directors has established a standing Audit Committee. Membership of the Audit
Committee is determined annually by the Board of Directors. Adjustments to
committee assignments may be made at any time. As of March 31, 2009,
membership of the Audit Committee was as set forth above under "Board
Composition."
The Board
of Directors has determined that each member of the Audit Committee meets the
independence and financial literacy requirements of the SEC and Nasdaq. The
Board has also determined that Messrs. Fitzpatrick and Edgar are "audit
committee financial experts" under SEC rules, have accounting or related
financial management experience, and are financially sophisticated under the
Nasdaq Marketplace Rules.
Item
11. Executive
Compensation
COMPENSATION
DISCUSSION AND ANALYSIS
Compensation
Philosophy, Principles and Policies
In order
to understand our compensation philosophy, principles and policies, it is
helpful to understand our historical financial performance. Prior to
2004, we showed profits in only three years since our formation in 1979. During
most of this 24-year period, oil and gas prices were low, sources of debt and
equity capital were scarce and our assets were generally illiquid. These
conditions forced us to minimize general and administrative overhead, including
executive and director compensation, to permit the Company to survive and grow.
Until 2007, our philosophy, policies and programs for executive and director
compensation were for the most part established during these lean
years.
In the
beginning of 2008, based upon the Company's financial performance in 2006 and
2007, the findings of several benchmark analyses (as further described below),
and the Company's acquisition of Output Exploration, LLC in April 2007, the
Compensation Committee made certain modifications to the named executive
officers' compensation.
The
Company's executive compensation program is designed to accomplish the following
objectives:
•
To attract and retain motivated executives who
substantially contribute to the Company's long-term success and the
creation of stockholder
value;
|
•
To reward executives when the Company performs
well financially; and
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•
To be competitive with the Company's peers
without establishing compensation targets at specific benchmark
percentiles.
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The
Compensation Committee believes that compensation decisions are complex and best
made after a review of Company performance and competitive pay information of
the Company's peers. Specifically, in determining individual pay components of
the named executive officers, the Compensation Committee considers the Company's
financial and operational performance, such as earnings per share,
profitability, cash flow as determined by several measures, revenue growth,
reserve replacement and business-unit-specific operational and financial
performance.
The
Compensation Committee designs and approves executive compensation packages to
reward both Company performance and the achievement of strategic business
objectives, which the Compensation Committee believes aligns the long-term
interests of the named executive officers with stockholders. Accordingly, as the
Company's production, reserves, cash flow as determined by several measures, and
profits increase, so does executive compensation. Conversely, if production,
reserves and profits decrease, executive compensation may be less
generous.
The
Company's Chief Executive Officer, Mr. James Sigmon, entered into an
employment agreement with the Company in October 1984. Under the terms of
this agreement, Mr. Sigmon's employment may be terminated by either the
Company or Mr. Sigmon upon 90 days written notice, with or without
cause.
In June
2008, the Board separated the roles of Chief Executive Officer and President in
order to facilitate the operations of the Company. Mr. Sigmon continues as Chief
Executive Officer and Mr. Gary Grinsfelder was promoted from Vice President -
Exploration to President. As President, Mr. Grinsfelder is part of the team that
is responsible for the Company's overall growth as well as managing the
Company's land, exploration, legal, and investor relations and corporate
communications departments.
Role
of the Compensation Committee
The
Compensation Committee approves, or recommends to the Board of Directors for
approval, all compensation decisions for the named executive officers, including
base salaries, short-term cash incentive awards and long-term equity incentive
awards. The Compensation Committee also administers the Company's 2005 Stock
Incentive Plan.
The
Compensation Committee aims to structure executive compensation in a manner that
achieves the compensation objectives described above. In general, in approving
executive compensation, the Compensation Committee reviews and considers, among
other things:
•
The Chief Executive Officer's recommendations on
executive compensation, except for his own compensation;
•
The Company's financial and operating
performance;
•
Competitive pay information of the Company's
peers;
•
Recommendations of the Company's compensation
consultant; and
•
Historical compensation information of each named
executive officer and changes in the cost-of-living, if any.
Role
of the Chief Executive Officer and Chief Financial Officer
The
Company's Chief Executive Officer, Mr. Sigmon, regularly attends
Compensation Committee meetings, but not executive sessions. In 2008,
Mr. Sigmon advised the Compensation Committee regarding, among other
things, (i) the general competitiveness of the Company's executive
compensation program, (ii) information on the Company's business strategies
and risks, financial results, reserve replacement, and other measures of
operational performance, (iii) the findings of a benchmark analysis
performed by the Company's outside Human Resource Manager, Padgett, Stratemann
& Co., L.L.P., certified public accountants and business advisors
("Padgett") in late 2006, (iv) the findings and recommendations of the
Company's Compensation Consultant, Propensity/Hayes International ("Propensity")
in early 2007, and (v) his recommendations of the named executive officers'
base salaries, short-term cash incentive awards and long-term equity incentive
awards, other than himself. Mr. Sigmon did not make any recommendations to the
Compensation Committee regarding the amount of his base salary, short-term cash
incentive award or long-term equity incentive award in 2008.
In
connection with Padgett's and Propensity's engagements with the Company in 2006
and 2007, respectively, both of these advisors reported to Mr. Sigmon and
Mr. Stark, the Company's Chief Financial Officer. Mr. Stark assisted the
Compensation Committee and Mr. Sigmon in compiling competitive pay
information and financial and operational performance information, as well as
coordinating with Padgett and Propensity to ensure that the Compensation
Committee's requests regarding executive compensation were
addressed.
Role
of the Outside Human Resources Manager and Compensation Consultant
In
November 2006, the Company requested Padgett to conduct a benchmark
analysis of numerous key employees' base salaries, including the named executive
officers. This review was performed utilizing the most recent Mercer Energy
Compensation Survey and ECI Oil & Gas E&P Compensation Survey. The
Mercer Energy Compensation Survey contains data submitted by over 180
organizations involved in the oil and gas industry, and the ECI Oil & Gas
E&P Compensation Survey contains data submitted by almost 100 oil and gas
exploration and production companies. The Compensation Committee considered the
competitive pay information provided by these two surveys equally relevant and
important.
In
connection with the Company's acquisition of Output Exploration, LLC in
April 2007, the Company engaged Propensity, a compensation consultant, to
review a variety of compensation issues. In general, Propensity
conducted a benchmark analysis to ensure certain employees, including the named
executive officers, were adequately compensated in terms of base salary,
short-term incentive pay and long-term incentive pay.
The
Compensation Committee did not engage a compensation consultant in 2008, but
instead continued to rely on Padgett's 2006 analysis and Propensity's 2007
analysis. The Compensation Committee believed that these analyses provided it
with sufficient information in evaluating and determining 2008 compensation
levels.
Benchmarking
of Executive Compensation
In
approving the named executive officers' base salaries during 2008, the
Compensation Committee referred back to the benchmark analyses that had been
done in late 2006 and early 2007. In evaluating competitive pay information, the
Compensation Committee did not target the named executive officers' compensation
to specific percentiles. Instead, the Compensation Committee approved individual
pay components and total compensation levels using an approach that focused on
the Compensation Committee's judgment and discretion as to the overall fairness
of the named executive officers' compensation. The benchmark analyses referred
to above provided the Compensation Committee the framework necessary to make
these fairness determinations, as well as assisted them in determining whether
such compensation levels accomplished the executive compensation program's
objectives.
In
March 2007, Propensity benchmarked the Company's executive compensation
program against the following oil and gas exploration and production
companies:
•
|
Abraxas
Petroleum
|
•
|
Goodrich
Petroleum
|
•
|
American
Oil & Gas, Inc.
|
•
|
Gulfport
Energy
|
•
|
Arena
Resources
|
•
|
Harken
Energy
|
•
|
Bois
d'Arc Energy
|
•
|
Harvest
Natural Resources, Inc.
|
•
|
Brigham
Exploration
|
•
|
Meridian
Resource Corp.
|
•
|
Callon
Petroleum
|
•
|
Parallel
Petroleum
|
•
|
Cano
Petroleum
|
•
|
Petrohawk,
Inc.
|
•
|
Carrizo
Oil & Gas, Inc.
|
•
|
Petroleum
Development Corp.
|
•
|
Clayton
Williams Energy, Inc.
|
•
|
PetroQuest
Energy
|
•
|
Dorchester
Minerals
|
•
|
PrimeEnergy
Corp.
|
•
|
Edge
Petroleum
|
•
|
Toreador
Reserve Corp.
|
•
|
Gastar
Expl Ltd
|
•
|
Warren
Resources
|
•
|
GMX
Resources, Inc.
|
The above
peer companies were selected by Propensity, with the assistance of the Company,
based upon their market capitalization, annual revenue and geographical
location. The Company elected not to use the peer group utilized in the
Company's 2007 performance graph for purposes of benchmarking executive
compensation, because the Compensation Committee believed (and continues to
believe that) the above companies better represented the Company's direct
competitors for employee talent. In the past few years, the Company has been
operating in an extremely competitive labor market and believes it competes for
executive talent with each of these above companies on a regular
basis.
The
Compensation Committee approves compensation at levels it believes are fair and
will accomplish the executive compensation program's objectives. The
Compensation Committee further believes that not restricting compensation levels
to specific benchmark percentiles enables it to be responsive to the specific
performance of the Company and the dynamics of its industry.
Elements of
Compensation
Total
compensation for the named executive officers consists of one or more of the
following components:
•
Base salary;
•
Short-term cash incentive award;
•
Long-term equity incentive award; and
•
Other perquisites.
Generally,
the Compensation Committee annually reviews each element of compensation
individually and considers it collectively with the other elements to ensure
each named executive officer's total compensation is consistent with the
executive compensation program's objectives.
Base
Salary
The
Company provides the named executive officers with a base level of monthly
income for the individual expertise, skills, knowledge and experience they offer
to the Company's management team. The named executive officers' base salaries
were as follows:
|
Base
Salary
as of 12/31/07 ($)
|
Base
Salary
as of 12/31/08 ($)
|
James
E. Sigmon,
Chairman
&CEO
|
350,000
|
350,000
|
|
Gary
S. Grinsfelder (1),
President
|
185,000
|
315,000
|
|
P.
Mark Stark,
VP
& CFO
|
220,000
|
235,000
|
|
James
J. Bookout,
VP
& COO
|
200,000
|
220,000
|
|
M.
Frank Russell,
VP,
Secretary & General Counsel
|
185,000
|
195,000
|
|
Roberto
R. Thomae,
VP-Capital
Markets
|
185,000
|
195,000
|
|
(1)
On January 1, 2008, Mr. Grinsfelder's salary, as Vice President of
Exploration, was increased to $220,000. However, in connection with Mr.
Grinsfelder's promotion to President, his salary was then increased from
$220,000 to $315,000 on June 26,
2008.
|
Except
for Mr. Sigmon, each of the other named executive officers received increases in
their base salary on January 1, 2008. The Compensation Committee approved these
increases as a result of (i) the benchmark analysis performed by Propensity in
2007, and (ii) each named executive officer's continuing increase in
responsibilities as a result of the Company's consummation of the Output
Exploration, LLC acquisition in April 2007. The acquisition of Output
Exploration, LLC immediately doubled the Company's proved reserves and increased
its current oil and natural gas production by nearly two-thirds. At the end of
2008, these oil and natural gas properties accounted for approximately 49.7% and
24.2% of the Company's proved reserves and oil and natural gas production,
respectively.
As
indicated in footnote 1 of the above table, Mr. Grinsfelder's base salary was
increased in June 2008 as a result of his promotion to President. Mr.
Grinsfelder's increase in base salary was based upon (i) his increased
responsibilities, including being part of the team responsible for the Company's
overall growth as well as managing the Company's land, exploration, legal, and
investor relations and corporate communications departments, and (ii) the
competitive pay information of the Company's peers. Prior to his promotion, Mr.
Grinsfelder was responsible for only the Company's exploration and development
activities.
The
salary increases in January
2008 (and again in June
2008 with respect to Mr. Grinsfelder) were not based upon specific benchmark
percentiles or upon a formula-driven framework. Instead, the increases were
based upon the Compensation Committee's judgment and discretion as to the
overall fairness of the named executive officers' base salaries.
None of
the named executive officers have received an increase in their base salaries in
2009.
In light
of Mr. Sigmon's overriding royalty interest income (as further described below),
the Compensation Committee determined Mr. Sigmon's compensation was in-line with
the executive compensation program's objectives and, therefore, his base salary
was not increased in 2008.
In 1994,
the Board of Directors granted Mr. Sigmon a one percent (1%) overriding
royalty interest in its Paloma and Kincaid Leases in Maverick County, Texas
(when this overriding royalty interest had little or no value), in consideration
of Mr. Sigmon agreeing to reduce his base salary to $72,000 per year. In
1996, the Board of Directors expanded this agreement to include a one percent
(1%) overriding royalty interest in all oil and gas leases that the Company had
then acquired or would acquire during Mr. Sigmon's term as Chief Executive
Officer. At the time these agreements were made, Mr. Sigmon's income from
the overriding royalty interests was almost nonexistent, but due to the
Company's success since 1996 under Mr. Sigmon's leadership,
Mr. Sigmon's 2008 gross overriding royalty income equaled $1,879,851. His
overriding royalty income is expected to decline substantially for 2009 as a
result of the collapse of commodity prices in late 2008.
The
overriding royalty interests are Mr. Sigmon's transferable real property
rights and are independent from his employment with the Company. Mr. Sigmon
is entitled to retain any existing overriding royalty interests he may own upon
his separation with the Company. In order to provide a full picture to the
Company's stockholders of all of Mr. Sigmon's income streams, the Company
has historically disclosed the amount of royalty income received by
Mr. Sigmon in the Summary Compensation Table included in the Company's
annual proxy statement, and this Amendment No. 1, specifically footnoting that
such amount is derived from the overriding royalty interests.
The
income received by Mr. Sigmon from his overriding royalty interests has
historically been taken into account by the Compensation Committee and the Board
of Directors, as applicable, in setting Mr. Sigmon's base salary,
short-term incentive pay, and long-term incentive pay, if any.
In 1994
and 1996, when the Board of Directors agreed to grant Mr. Sigmon his
overriding royalty interest, the Board believed that this arrangement would
align Mr. Sigmon's interests with the success of the Company's oil and gas
exploration and production activities, and the Board continues to hold this
belief. Notwithstanding, in the beginning of 2008 due to discussions with
significant stockholders of the Company, the Company's positive economic
performance in 2007, and estimated future oil and gas prices at that time, the
Board of Directors acknowledged that stock ownership by Mr. Sigmon in lieu
of his ownership of the overriding royalty interests might be preferable, based
upon the belief that stock ownership would more directly align Mr. Sigmon's
interests with those of the Company's stockholders. Accordingly, upon
recommendation of the Board, TXCO stockholders approved the adoption of the TXCO
Resources Inc. Overriding Royalty Purchase Plan (the "ORPP") at the 2008 Annual
Meeting of Stockholders of the Company held on May 30, 2008.
The ORPP
provides the Company the ability to purchase the overriding royalty interests of
Mr. Sigmon, in the Company's existing and future oil and gas leases in one or
more transactions in exchange for shares of the Company's common stock, cash or
a combination thereof, if and when purchase terms are agreed upon by the Board
of Directors and Mr. Sigmon. The ORPP has 3,000,000 shares of TXCO common stock
reserved for issuance thereunder. On September 22, 2008, the Board of Directors
engaged Huddleston & Co., Inc., a petroleum and geological engineering,
consulting, and financial services firm, to provide the appraisal report
contemplated by the ORPP. However, as a result of the Company's current
strategic alternatives review, Huddleston's engagement has been suspended at
this time. As previously disclosed, on February 12, 2009, the Company retained
Goldman, Sachs & Co. as its financial advisor for a strategic alternatives
review designed to enhance stockholder value, with may include sale of certain
assets, issuance of stock, additional debt or other securities, or a merger or
sale of the Company.
The
foregoing summary of the ORPP does not purport to be complete and is qualified
by reference to the complete text of the ORPP, which is attached as Exhibit 10.2
of the Company's Current Report on Form 8-K filed with the SEC on June 4,
2008, and incorporated by reference herein in its entirety.
Short-Term Cash Incentive
Award
Each
Company employee, including the named executive officers, is eligible for a
short-term, year-end cash incentive award. In recent past years, the amount of
the cash incentive award, if paid, was equal to one-half of one month's
salary. However, as a result of the rapid decline in oil and natural
gas prices in the fourth quarter of 2008, the amount of the cash incentive award
was reduced to one-quarter of one month's salary. The payment of the short-term
cash incentive award is in the Compensation Committee's sole discretion. While
the payment of the cash incentive award is not based upon pre-established
performance goals, its payment has historically depended upon the Company's
financial and operating performance during the year. The payment of the
short-term cash incentive award is intended to reward all Company employees,
including the named executive officers, for their commitment and service to the
Company during the prior fiscal year. See the 2008 Summary Compensation Table
set forth below in this Amendment No. 1 for further discussion of the amount of
the short-term cash incentive award that each named executive officer
received.
Long-Term Equity Incentive
Award
The
Company's 2005 Stock Incentive Plan is designed to align the long-term interests
of employees with the Company's stockholders and forms the basis of the
Company's long-term incentive plan for the named executive officers. The
Compensation Committee believes that a significant portion of an executive's
compensation should be dependent on value created for our stockholders. In
January 2008, the Compensation Committee granted restricted stock awards to
its key employees, including most of the named executive officers.
In
determining the size of the 2008 long-term equity incentive awards to the named
executive officers, the Compensation Committee considered the following
factors:
•
Recommendations of the Company's Chief Executive
Officer;
•
The Company's 2007
financial and operational performance, including earnings per share,
profitability, revenue growth, cash flow, reserve replacement and
business-unit-specific operational and financial performance;
•
The equity grant practices of the Company's peers,
without establishing award targets at specific benchmark
percentiles;
•
Overall effectiveness of the Company's executive
compensation program; and
•
Historical compensation levels for each named executive
officer.
In
January 2008, each named executive officer, other than Mr. Sigmon, received
10,000 restricted shares of the Company's common stock, vesting in three equal
annual installments commencing on the one-year anniversary of the grant date.
Due to the limited availability of shares under the Company's 2005 Stock
Incentive Plan, the number of restricted shares awarded to such officers in
2008 was one-half of the number of shares awarded in 2007. At the 2008 Annual
Meeting of Stockholders, held in May 2008, the Company's stockholders approved
an amendment to the 2005 Stock Incentive Plan, which increased the number of
shares available for grant by an additional 1,951,000 shares.
On June
26, 2008, Mr. Grinsfelder also received an additional grant of 75,000
restricted shares of the Company's common stock, in connection with his
promotion to President of the Company, which vests in three equal annual
installments commencing on the one-year anniversary of the grant
date.
The
amount of the restricted stock award granted in January 2008 to these named
executive officers (as well as the amount of additional grant of restricted
stock to Mr. Grinsfelder in June 2008) was not based upon specific benchmark
percentiles or upon a formula-driven framework. Instead, the amounts were based
upon the Compensation Committee's judgment and discretion as to the overall
fairness of the named executive officers' total compensation in
2008.
In light
of Mr. Sigmon's overriding royalty interests, the Compensation Committee
determined Mr. Sigmon's total compensation for 2008 was fair and in-line
with the executive compensation program's objectives and, therefore, he was not
granted a long-term incentive award in 2008. Mr. Sigmon has not received a
long-term equity incentive award since 1998.
Other
Perquisites
From time
to time, the Company makes available to the named executive officers certain
other personal benefits. These perquisites may include club memberships, tickets
to sporting or cultural events, tickets to community events, and matching
contributions under the Company's 401(k) Plan. The Company also
provides all of its employees, including the named executive officers, certain
health insurance benefits.
The
Compensation Committee believes these perquisites provide a more tangible
incentive than an equivalent amount of cash compensation. In determining total
compensation payable to the named executive officers for 2008, the Compensation
Committee considered these perquisites. However, as these perquisites represent
a relatively insignificant portion of the named executive officers' total
compensation, they did not materially influence the Compensation Committee's
decision in approving such officers' total compensation.
Change
of Control Agreements
The
Company has change of control agreements with James E. Sigmon, Gary S.
Grinsfelder, James J. Bookout, P. Mark Stark, M. Frank Russell, and Roberto R.
Thomae, as well as most other employees of the Company. Under these agreements,
upon a change of control of the Company, Mr. Sigmon and Mr. Grinsfelder would
each be paid three times their annual salary and Messrs. Bookout, Stark,
Russell, and Thomae would each be paid two times their annual salary, regardless
of whether their employment with the Company is terminated after such
event.
The
Compensation Committee did not consider the terms of the change of control
agreements in approving the named executive officers' individual pay components
or total compensation levels in 2008. Further information regarding these
agreements is set forth below in the "Change of Control and Termination
Arrangements" section of this Amendment No. 1.
Tax
Considerations
Section 162(m)
of the Internal Revenue Code places a limit of $1,000,000 on the amount of
compensation the Company may deduct for federal income tax purposes in any one
year with respect to certain senior executive officers of the Company. However,
compensation that is "performance-based," which is compensation that is paid
pursuant to pre-established objective performance goals that are based on
criteria approved by the stockholders and is determined and administered by the
Compensation Committee according to related regulations, is excluded from this
$1,000,000 limitation and is deductible by the Company.
Equity
Grant Practices
The
Compensation Committee has approved, or recommended to the Board of Directors
for approval, all grants of equity compensation to the named executive officers.
Additionally, from time-to-time, the Compensation Committee authorizes
Mr. Sigmon to make equity awards to non-executive employees. While the
Compensation Committee may not approve the individual award amounts to each
non-executive employee, the aggregate amount of shares of the Company's common
stock that may be awarded to the non-executive employees is approved by the
Compensation Committee or the Board of Directors. The Company does not have a
formal policy on timing of equity grants in connection with the release of
material non-public information to affect the value of
compensation. In the event that material non-public information
becomes known to the Compensation Committee prior to granting equity awards, the
Compensation Committee will take the existence of such information under
advisement and make an assessment in its business judgment whether to delay the
grant of the equity award in order to avoid any potential
impropriety.
Executive
Compensation in 2009
The
Compensation Committee has not granted the named executive officers an increase
in base salary, nor has it granted them any equity awards in 2009.
COMPENSATION
COMMITTEE REPORT
Notwithstanding
anything to the contrary set forth in any filings of TXCO Resources Inc. (the
“Company”) under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings by
reference, including this Amendment No. 1 on Form 10-K/A (this "Amendment No.
1") to our Annual Report on Form 10-K for the fiscal year ended December 31,
2008, in whole or in part, the following Compensation Committee Report shall not
be incorporated by reference into any such filings, and shall not be deemed
soliciting material as filed under the Securities Act or the Exchange
Act.
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis required by Item 402(b) of Regulation S-K with management and,
based on such review and discussions, the Compensation Committee recommended to
the Board of Directors that the Compensation Discussion and Analysis be included
in this Amendment
No.
1.
TXCO
Resources Inc. Compensation Committee
2008
Members
Jon
Michael Muckleroy, Alan L. Edgar and Jacob Roorda
2008
Executive Compensation
The
following table summarizes total compensation paid or earned by our named
executive officers who served in such capacities during 2008, 2007 and
2006.
2008
Summary Compensation Table
Name
and
Principal
Position
(a)
|
Year
(b)
|
Salary
($)
(c)
|
Bonus
($)
(d)
(1)
|
Stock
Awards
($)
(e)
(2)
|
Option
Awards
($)
(f)
(2)
|
All
Other
Compensation
($)
(i)
(3)
|
Total
($)
(j)
|
James
E. Sigmon,
|
2008
|
350,000
|
6,731
|
-
|
-
|
2,141,227
|
2,497,958
|
Chairman
& CEO
|
2007
|
350,000
|
13,462
|
-
|
-
|
2,221,948
|
2,585,410
|
|
2006
|
260,000
|
10,833
|
-
|
-
|
989,252
|
1,260,085
|
|
Gary
S. Grinsfelder,
|
2008
|
264,077
|
5,078
|
265,106
|
-
|
19,455
|
553,716
|
President
(4)
|
2007
|
92,500
|
7,115
|
54,833
|
-
|
2,620
|
157,068
|
|
P.
Mark Stark,
|
2008
|
233,846
|
4,497
|
199,703
|
-
|
18,326
|
456,372
|
VP
& CFO
|
2007
|
216,154
|
8,462
|
131,767
|
-
|
13,834
|
370,217
|
|
2006
|
175,000
|
7,292
|
80,575
|
18,000
|
875
|
281,742
|
|
James
J. Bookout,
|
2008
|
218,462
|
4,201
|
199,706
|
-
|
18,876
|
441,245
|
VP
& COO
|
2007
|
196,923
|
7,692
|
131,767
|
-
|
18,156
|
354,538
|
|
2006
|
160,000
|
6,667
|
80,575
|
18,000
|
4,000
|
269,242
|
|
M.
Frank Russell,
|
2008
|
194,231
|
3,735
|
223,006
|
-
|
18,457
|
439,429
|
VP,
Secretary & General
|
2007
|
180,192
|
7,115
|
155,067
|
-
|
18,642
|
361,016
|
Counsel
|
2006
|
125,000
|
6,250
|
83,400
|
-
|
188
|
214,838
|
|
Roberto
R. Thomae,
|
2008
|
194,231
|
3,735
|
199,706
|
-
|
18,600
|
416,272
|
VP-Capital
Markets
|
2007
|
181,535
|
7,115
|
131,767
|
-
|
18,808
|
339,225
|
|
2006
|
160,000
|
6,667
|
80,575
|
-
|
4,800
|
252,042
|
|
(1) These
amounts reflect the short-term cash incentive award paid in 2008, 2007,
and 2006, as applicable, which is further discussed in the Compensation
Discussion and Analysis section of this Amendment No.
1.
|
|
(2) For
2008, these amounts reflect the compensation expense recognized by the
Company in 2008 for financial statement reporting purposes in accordance
with FAS 123R for restricted stock awards, except no assumptions for
forfeitures were included, and includes restricted stock awards granted in
2006, 2007 and 2008. Additional information regarding the assumptions used
in calculating such compensation expense is set forth in Note F of the
Notes to Consolidated Financial Statements of our 2008 Annual Report on
Form 10-K, filed with the SEC on March 16, 2009. No forfeitures occurred
during 2008 for the named executive officers.
For
2007, these amounts reflect the compensation expense recognized by the
Company in 2007 for financial statement reporting purposes in accordance
with FAS 123R for restricted stock awards, except no assumptions for
forfeitures were included, and includes restricted stock awards granted in
2006 and 2007. Additional information regarding the assumptions used in
calculating such compensation expense is set forth in Note F of the Notes
to Consolidated Financial Statements of our 2007 Annual Report on Form
10-K, filed with the SEC on March 17, 2008. No forfeitures occurred
during 2007 for the named executive officers.
For
2006, these amounts reflect the compensation expense recognized by the
Company in 2006 for financial statement reporting purposes in accordance
with FAS 123R for stock option and restricted stock awards, as applicable,
except no assumptions for forfeitures were included, and includes stock
option awards granted in 2004 and restricted stock awards granted in 2006.
Additional information regarding the assumptions used in calculating such
compensation expense is set forth in Note F of the Notes to Consolidated
Financial Statements of our 2006 Annual Report on Form 10-K, filed with
the SEC on March 16, 2007. No forfeitures occurred during 2006 for
the named executive officers.
|
|
NOTE
: The footnotes
to this table continue on the next page.
(3) For
2008, these amounts represent for Mr. Sigmon: $1,879,851 in royalty income
received from his overriding royalty interests in Company oil and gas
leases, the value of the 1% overriding royalty interests he acquired in
oil and natural gas leases acquired by the Company during 2008, which was
valued by the Company at $237,147, $6,900 matching contribution to the
Company's 401(k) Plan, $5,801 for club dues, and $11,528 for sporting
event tickets; for Mr. Grinsfelder: $6,893 matching contribution to the
Company's 401(k) Plan, $11,528 for sporting event tickets and $1,034 for
club dues; for Mr. Stark: $6,190 matching contribution to the Company's
401(k) Plan, $608 for club dues, and $11,528 for sporting event tickets;
for Mr. Russell: $5,849 matching contribution to the Company's 401(k)
Plan, $1,080 for club dues, and $11,528 for sporting event tickets; for
Mr. Bookout: $6,271 matching contribution to the Company's 401(k) Plan,
$1,077 for club dues, and $11,528 for sporting event tickets; and for Mr.
Thomae: $5,844 matching contribution to the Company's 401(k) Plan, $1,228
for club dues, and $11,528 for sporting event tickets.
The
value of Mr. Sigmon's 1% overriding royalty interests acquired during 2008
($237,147) is equal to 1% of the Company's purchase price of such oil and
natural gas leases. See the Compensation Discussion and Analysis section
of this Amendment No. 1 for further discussion of Mr. Sigmon's overriding
royalty interests.
|
|
(4)
Mr. Grinsfelder joined the Company in May 2007 in connection
with the Company's acquisition of Output Exploration,
LLC.
|
2008
Grants of Plan-Based Awards Table
Name
(a)
|
Grant
Date
(b)
|
All
Other Stock
Awards:
Number
of
Shares
of Stock
or
Units
(#)
(i)
(1)
|
All
Other
Options
Awards:
Number
of
Securities
Underlying
Options
(#)
(j)
|
Exercise
or Base
Price
of Option
Awards
($/sh)
(k)
|
Grant
Date
Fair
Value of
Stock
and
Option
Awards
($)
(l)
(2)
|
James
E. Sigmon
|
n/a
|
-
|
-
|
-
|
-
|
Gary
S. Grinsfelder
|
1/24/08
|
10,000
|
-
|
-
|
119,800
|
|
6/26/08
|
75,000
|
-
|
-
|
807,000
|
P.
Mark Stark
|
1/24/08
|
10,000
|
-
|
-
|
119,800
|
James
J. Bookout
|
1/24/08
|
10,000
|
-
|
-
|
119,800
|
M.
Frank Russell
|
1/24/08
|
10,000
|
-
|
-
|
119,800
|
Roberto
R. Thomae
|
1/24/08
|
10,000
|
-
|
-
|
119,800
|
|
(1) Amounts
reflect the annual long-term equity incentive award granted in the form of
restricted stock to the named executive officers on January 24, 2008.
Mr. Grinsfelder received an additional restricted stock award of
75,000 shares of the Company's common stock on June 26, 2008, in
connection with his promotion to the position of the President of the
Company All of the restricted stock awards were granted under the
Company's 2005 Stock Incentive Plan and vest in three equal annual
installments commencing on the one-year anniversary of the grant
date.
|
|
(2) Amounts
reflect the aggregate grant date fair value of the restricted stock awards
made in 2008, computed in accordance with FAS 123R, except no assumptions
for forfeitures were included. A discussion of the assumptions used in
calculating the grant date fair value is set forth in Note F of the Notes
to Consolidated Financial Statements of our 2008 Annual Report on Form
10-K, filed with the SEC on March 16, 2009. The Company does not currently
expect to pay dividends on its common
stock.
|
2008
Outstanding Equity Awards at Fiscal Year-End Table
|
|
Option
Awards
|
Stock
Awards
|
Name
(a)
|
Grant
Date
(1)
|
Number
of
Securities
Underlying
Unexercised
Options
--
Exer-cisable
(#)
(b)
|
Number
of
Securities
Underlying
Unexercised
Options
--
Unexer-cisable
(#)
(c)
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercisable
Unearned
Options
(#)
(d)
|
Options
Exercise
Price
($)
(e)
|
Option
Expiration
Date
(f)
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
(g)
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
(7)
(h)
|
James
E. Sigmon
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
Gary
S. Grinsfelder
|
05/11/2007
|
-
|
-
|
-
|
-
|
-
|
16,667
(4)
|
24,834
|
|
01/24/2008
|
-
|
-
|
-
|
-
|
-
|
10,000
(5)
|
14,900
|
|
06/26/2008
|
-
|
-
|
-
|
-
|
-
|
75,000
(6)
|
111,750
|
|
|
|
|
|
|
|
|
|
P.
Mark Stark
|
06/20/2003
|
25,000
|
-
|
-
|
4.38
|
06/20/13
|
-
|
-
|
|
09/30/2004
|
25,000
|
-
|
-
|
5.00
|
09/30/14
|
-
|
-
|
|
01/27/2006
|
-
|
-
|
-
|
-
|
-
|
10,000
(2)
|
14,900
|
|
05/11/2007
|
-
|
-
|
-
|
-
|
-
|
13,334
(4)
|
19,868
|
|
01/24/2008
|
-
|
-
|
-
|
-
|
-
|
10,000
(5)
|
14,900
|
|
|
|
|
|
|
|
|
|
James
J. Bookout
|
09/30/2004
|
25,000
|
-
|
-
|
5.00
|
09/30/14
|
-
|
-
|
|
01/27/2006
|
-
|
-
|
-
|
-
|
-
|
10,000
(2)
|
14,900
|
|
05/11/2007
|
-
|
-
|
-
|
-
|
-
|
13,334
(4)
|
19,868
|
|
01/24/2008
|
|
|
|
|
|
10,000
(5)
|
14,900
|
|
|
|
|
|
|
|
|
|
M.
Frank Russell
|
03/23/2006
|
-
|
-
|
-
|
-
|
-
|
10,000
(3)
|
14,900
|
|
05/11/2007
|
-
|
-
|
-
|
-
|
-
|
13,334
(4)
|
19,868
|
|
01/24/2008
|
|
|
|
|
|
10,000
(5)
|
14,900
|
|
|
|
|
|
|
|
|
|
Roberto
R. Thomae
|
09/23/1999
|
50,000
|
-
|
-
|
2.125
|
09/23/09
|
-
|
-
|
|
08/01/2001
|
50,000
|
-
|
-
|
2.96
|
08/01/11
|
-
|
-
|
|
01/27/2006
|
-
|
-
|
-
|
-
|
-
|
10,000
(2)
|
14,900
|
|
05/11/2007
|
-
|
-
|
-
|
-
|
-
|
13,334
(4)
|
19,868
|
|
01/24/2008
|
|
|
|
|
|
10,000
(5)
|
14,900
|
|
(1) For
a better understanding of the table, an additional column showing the
grant date of stock options and restricted stock awards has been
included.
|
|
(2) These
shares vested on January 27, 2009.
|
|
(3) These
shares vested on March 23, 2009.
|
|
(4) These
shares vest in 50% increments on May 11, 2009 and
2010.
|
|
(5) These
shares vest in 33 1/3% increments on January 24, 2009, 2010 and
2011.
|
|
(6) These
shares vest in 33 1/3% increments on June 26, 2009, 2010 and
2011.
|
|
(7) Market
value of the unvested restricted stock is based upon the closing sale
price of the Company's common stock of $1.49 on December 31, 2008,
the last business day of the 2008 fiscal
year.
|
2008
Option Exercises and Stock Vested Table
|
Option
Awards
|
Stock
Awards
|
Name
(a)
|
Number
of
Shares
Acquired
on
Exercise
(#)
(b)
|
Value
Realized
on
Exercise
($)
(1)
(c)
|
Number
of
Shares
Acquired
on
Vesting
(#)
(d)
|
Value
Realized
on
Vesting
($)
(2)
(e)
|
James
E. Sigmon
|
400,000
|
4,275,000
|
-
|
-
|
Gary
S. Grinsfelder
|
-
|
-
|
8,333
|
92,746
|
P.
Mark Stark
|
-
|
-
|
16,666
|
196,693
|
James
J. Bookout
|
-
|
-
|
16,666
|
196,693
|
M.
Frank Russell
|
-
|
-
|
16,666
|
196,693
|
Roberto
R. Thomae
|
-
|
-
|
16,666
|
196,693
|
|
(1) The
value realized on exercise of stock options is based upon the difference
between the market price of the Company's common stock on the date of
exercise and the exercise price of the stock options.
|
|
(2) The
value realized on vesting of restricted stock is based upon the market
price of the Company's common stock on the applicable vesting
date.
|
Change
of Control and Termination Arrangements
Change of Control
Agreements
The
Company has entered into change of control agreements with each of James E.
Sigmon, Gary S. Grinsfelder, P. Mark Stark, James J. Bookout, M. Frank Russell,
and Roberto R. Thomae, as well as most other employees of the Company. If there
is a "change of control" of the Company, then each of the foregoing executives
is entitled to be paid two times his annual salary, except for Mr. Sigmon and
Mr. Grinsfelder, who are each entitled to be paid three times their annual
salary. If any payments to an employee, whether pursuant to the change of
control agreement, an employee benefit plan of the Company, or another
arrangement with the Company, would result in an "excess parachute payment"
within the meaning of Section 4999 of the Internal Revenue Code, the
Company will pay such additional amounts to such employee as is necessary so
that such employee is in the same after-tax position that the employee would
have been if Section 4999 did not apply.
The
change of control payments will be paid to the Company's employees in lump sum
on or before 30 days following the date of the change of control; provided,
the Company can defer the payments until March 15
th
of the
year that follows the year in which the change of control
occurred. In the event an employee is terminated during such period,
the lump sum payments must be paid to the employee on or before 10 days
following such termination. The Company's employees are entitled to the change
of control benefits regardless of whether their employment is terminated by the
Company.
Generally,
a "change of control" means one or more of the following events or
occurrences:
(i)
|
any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation, or pursuant to which shares of the
Company's common stock would be converted in whole or in part into cash,
securities or other property, other than a merger of the Company in which
the holders of the Company's common stock immediately prior to the merger
have substantially the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or any sale, lease,
exchange or transfer (in one transaction or a series of related
transactions) of all or substantially all the assets of the
Company,
|
(ii)
|
the
Company's stockholders approve any plan or proposal for the liquidation or
dissolution of the Company,
|
(iii)
|
any
person other than the Company or a subsidiary thereof or any employee
benefit plan sponsored by the Company or a subsidiary thereof or a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock
of the Company, shall become the beneficial owner of securities of the
Company representing 20% or more of the combined voting power of the
Company's then outstanding securities ordinarily (and apart from rights
accruing in special circumstances) having the right to vote in the
election of directors, as a result of a tender or exchange offer, open
market purchases, privately negotiated purchases or
otherwise,
|
(iv)
|
at
any time during a period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
shall cease for any reason to constitute at least a majority thereof,
unless the election or the nomination for election by the Company's
stockholders of each new director during such two-year period was approved
by a vote of at least two-thirds of the directors then still in office who
were directors at the beginning of such two-year period,
or
|
(v)
|
any
other event shall occur that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under
the Securities Exchange Act of 1934, as
amended.
|
The
change of control agreements were structured as "single trigger" arrangements to
provide retention incentives for the Company's employees, including the named
executive officers, during what can often be an uncertain time for employees. As
change of control events frequently result in internal restructuring and the
termination of employees, the Compensation Committee believes that these
agreements permit the Company's employees to focus their attention and energy on
the Company's business without any distractions regarding the potential effects
of a change of control. Additionally, these arrangements provide employees with
additional monetary motivation to complete a transaction that the Board of
Directors believes is in the best interests of the Company and its
stockholders.
The
amount of the change of control payments, three times annual salary for
Mr. Sigmon and Mr. Grinsfelder, and two times annual salary for the other
named executive officers, was set in the Compensation Committee's judgment and
discretion and not upon a formula-driven framework. These agreements also
provide for a tax gross-up payment in the event the employees are subject to the
excise tax imposed on certain "excess parachute payments" pursuant to
Section 4999 of the Internal Revenue Code. The Compensation Committee
believes that the tax gross-up provisions are appropriate to ensure that
employees receive the full value of the payments and benefits available under
these agreements. The change of control agreements are designed to provide
balanced and appropriate post-change of control benefits that eliminate any
potential tension between the interests of the Company's employees and its
stockholders. The imposition of the punitive taxes imposed by Section 4999
of the Internal Revenue Code on "excess parachute payments" significantly and
adversely upsets that balance. Therefore, the Compensation Committee believes it
is necessary, in order to satisfy its objectives in providing these agreements,
to shield the Company's employees from the negative tax consequences imposed on
"excess parachute payments."
TXCO Resources Inc. 2005
Stock Incentive Plan
In
addition to the change of control agreements referenced above, the Company's
2005 Stock Incentive Plan provides, generally, that employees' outstanding,
unvested stock options and restricted stock awards will vest (i) upon a change
of control or (ii) upon the dissolution or liquidation of the Company, or (iii)
if the Company merges into, consolidates with, or sells or otherwise transfers
all or substantially all of its assets to another corporation and provision is
not made pursuant to the terms of such transaction for the assumption by the
surviving, resulting or acquiring corporation of outstanding awards under the
plan, or for the substitution of new awards therefor.
The plan
also provides that the Compensation Committee may, in its discretion, provide in
any award agreement for certain payments to be made by the Company to a
participant in the event acceleration of the vesting of restricted stock or
stock options is subject to the excise tax imposed under Section 4999 of
the Internal Revenue Code or any interest or penalties with respect to such
excise tax. An award agreement may also provide that the participant shall be
entitled to receive a gross-up payment in an amount such that after payment by
the participant of all taxes (including interest and penalties), including
excise tax payment on the gross-up payment, the participant retains a net amount
equal to the excise tax imposed upon such acceleration of restricted stock or
stock options.
For
participants who are not employees, a "change of control" is triggered if
incumbent directors cease for any reason to constitute at least a majority of
the Board of Directors. Incumbent directors are the individuals who constituted
the board of directors on April 29, 2005, as well as individuals becoming a
director after April 29, 2005, whose election or nomination is approved by
a vote of at least a majority of the incumbent directors then in office, other
than any individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a person or entity other than the Board of Directors when
comprised of incumbent directors. A "change of control" is also triggered by any
of the following events:
(i)
|
the
approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company,
|
(ii)
|
the
acquisition (other than from the Company) by any individual, entity or
group (other than the Company or any employee benefit plan or related
trust sponsored or maintained by the Company or any corporation controlled
by the Company) of beneficial ownership of 20% or more of either the
outstanding shares of the Company's common stock or the combined voting
power of the Company's outstanding voting securities entitled to vote
generally in the election of directors
or
|
(iii)
|
the
consummation of a reorganization, merger, consolidation or sale or other
disposition of all or substantially all of the assets of the
Company.
|
The
events described in clause (ii) and (iii) above will not trigger a
change of control if
(A)
|
the
stockholders of the Company immediately prior to such transaction
beneficially own more than 60% of the outstanding shares of the common
stock and the combined voting power of the acquiring, resulting or
surviving corporation in such transaction (directly or through one or more
subsidiaries) in substantially the same proportions as their ownership of
the Company's common stock and the combined voting power of the Company's
voting securities immediately prior to such
transaction,
|
(B)
|
no
person (with certain exceptions) beneficially owns 20% or more of the
outstanding shares of the common stock and the combined voting power of
the acquiring, resulting or surviving corporation in such transaction,
except to the extent that such ownership existed prior to such
transaction, and
|
(C)
|
at
least a majority of the members of the board of directors of the
acquiring, resulting or surviving corporation in such transaction were
incumbent directors at the time of the execution of the initial agreement,
or of the action of the Board of Directors, providing for such
transaction.
|
For
participants who are employees, change of control will mean the occurrence of
any of the events described above in this "Change of Control and Termination
Arrangements--TXCO Resources Inc. 2005 Stock Incentive Plan," section of this
report or any other event defined as a change of control in such employee's
change of control agreement, which definition is set forth above in the "Change
of Control and Termination Arrangements--Change of Control Agreements" section
of this report.
The 2005
Stock Incentive Plan further provides that upon a participant's termination of
employment due to death, disability or "special circumstances" (as determined by
the Compensation Committee), the Compensation Committee may, in its sole
discretion, accelerate the vesting of stock options and waive the vesting
requirements of restricted stock awards. While the Compensation Committee has
the authority to accelerate and waive vesting requirements of awards upon
"special circumstances," the Compensation Committee believes such exercise would
be reserved for exceptional, rare circumstances. For example, in connection with
Robert L. Foree, Jr.'s and James L. Hewitt's resignation as a director of the
Company pursuant to the terms of the Settlement Agreement, dated March 15,
2008, among the Company and Third Point, et al., the Compensation Committee
accelerated the vesting of 15,000 and 13,334 shares of Mr. Foree's and
Hewitt's restricted stock, respectively. To date, this is the only time that the
Compensation Committee has accelerated the vesting of awards as a result of a
participant's termination of employment due to "special
circumstances."
There are
no outstanding awards under the Company's 1995 Flexible Incentive Plan that are
subject to accelerated vesting under the terms of such Plan.
James E. Sigmon's Employment
Agreement
Mr. Sigmon's
employment agreement provides that he is entitled to 90 days written notice
prior to termination, with or without cause.
The table
below quantifies the potential payments to the named executive officers upon
either termination of their employment or a change of control of the Company as
of December 31, 2008.
2008
Potential Payments upon Termination and Change of Control (1)
Name
|
Benefit
|
Termination
by
the
Company,
With
or
Without
Cause
($)
|
Voluntary
Termination
($)
|
Death
or
Disability
($)
|
Change
of
Control
($)
|
James
E. Sigmon
|
Severance
|
87,500
(2)
|
0
|
0
|
1,050,000
(3)
|
|
280G
Tax Gross-Up (4)
|
0
|
0
|
0
|
0
|
Total
|
|
87,500
|
0
|
0
|
1,050,500
|
|
|
|
|
|
|
Gary
Grinsfelder
|
Severance
|
0
|
0
|
0
|
945,000
(3)
|
|
Restricted
stock award vesting (6) (7)
|
0
|
0
|
151,484
|
151,484
|
|
280G
Tax Gross-Up (4)
|
0
|
0
|
0
|
0
|
Total
|
|
0
|
0
|
151,484
|
1,096,484
|
|
|
|
|
|
|
P.
Mark Stark
|
Severance
|
0
|
0
|
0
|
470,000
(5)
|
|
Restricted
stock award vesting (6) (7)
|
0
|
0
|
49,668
|
49,668
|
|
280G
Tax Gross-Up (4)
|
0
|
0
|
0
|
0
|
Total
|
|
0
|
0
|
49,668
|
519,668
|
|
|
|
|
|
|
James
J. Bookout
|
Severance
|
0
|
0
|
0
|
440,000
(5)
|
|
Restricted
stock award vesting (6) (7)
|
0
|
0
|
49,668
|
49,668
|
|
280G
Tax Gross-Up (4)
|
0
|
0
|
0
|
0
|
Total
|
|
0
|
0
|
49,668
|
489,668
|
|
|
|
|
|
|
M.
Frank Russell
|
Severance
|
0
|
0
|
0
|
390,000
(5)
|
|
Restricted
stock award vesting (6) (7)
|
0
|
0
|
49,668
|
49,668
|
|
280G
Tax Gross-Up (4)
|
0
|
0
|
0
|
0
|
Total
|
|
0
|
0
|
49,668
|
439,668
|
|
|
|
|
|
|
Roberto
R. Thomae
|
Severance
|
0
|
0
|
0
|
390,000
(5)
|
|
Restricted
stock award vesting (6) (7)
|
0
|
0
|
49,668
|
49,668
|
|
280G
Tax Gross-Up (4)
|
0
|
0
|
0
|
0
|
Total
|
|
0
|
0
|
49,668
|
439,668
|
|
(1)
Amounts reflected in the table were calculated assuming a
named executive officer was terminated on December 31, 2008, or a
change of control of the Company occurred on December 31, 2008, which
was the last business day of the 2008 fiscal year. Each named executive
officer is entitled to receive amounts earned during the term of his
employment regardless of the manner in which he is terminated. These
amounts include base salary and any other benefits entitled to under
applicable employee benefit plans, and are not reflected in the table. The
table reflects only the additional compensation and benefits that the
named executive officers are estimated to receive upon termination or a
change of control of the Company. The amounts reflected in the change of
control column are payable, regardless of whether the executive is
terminated after a change of control of the Company. The actual amounts to
be paid to an executive can only be determined at the time of his actual
termination.
|
|
(2)
Under the terms of Mr. Sigmon's employment agreement, he
is entitled to 90 days prior written notice of termination, with or
without cause. Accordingly, the amount reflects three months of his base
salary as of December 31, 2008.
|
|
(3)
Amount reflects the respective officer's base salary as of
December 31, 2008, multiplied by
three.
|
NOTE
: The footnotes
to this table continue on the next page.
(4)
It is not anticipated that a Section 280G excise tax
gross-up payment would be required assuming termination or a change of
control on December 31, 2008. The Section 280G excise tax
gross-up payment on an actual termination or "change of control" may
differ based on factors such as transaction price, timing of employment
termination and payments, methodology for valuing stock options and
restricted stock awards, future stock option exercises, changes in
compensation, and reasonable compensation analyses the Company is required
to perform.
|
|
(5)
Amount reflects the officer's base salary as of
December 31, 2008, multiplied by two.
|
|
(6)
Under the Company's 2005 Stock Incentive Plan, the
Compensation Committee may accelerate the vesting of stock options and
restricted stock awards if a participant's termination of employment is
due to death or disability. The change of control agreements also provide
for the acceleration of stock options and unvested restricted stock awards
upon a change of control of the Company, regardless of whether such
officer is terminated.
|
|
(7)
As of December 31, 2008, the officer did not have any unvested stock
options. The amounts reflect the value of accelerating the officer's
restricted stock awards. This value is based upon the closing sale price
of the Company's common stock of $1.49 on December 31,
2008.
|
COMPENSATION
OF DIRECTORS
The
principal objectives of our director compensation program is to compensate
directors for time spent on the Company’s behalf, to ensure long-term retention
of directors and to align directors’ compensation with the long-term interests
of our stockholders. We attempt to accomplish these objectives in an economical
manner through a combination of cash retainer fees and equity awards in the form
of restricted stock and stock option awards.
The Board
of Directors, upon the recommendation of the Compensation Committee, approves
annual compensation for directors who are not officers or employees of the
Company or its subsidiaries. In approving non-employee director compensation,
the Compensation Committee considers the significant amount of time that
directors spend in fulfilling their duties to the Company, as well as the skill
level required of Board members. The Company’s executive officers do not make
recommendations regarding the non-employee directors’ compensation.
Each new
non-employee director receives 40,000 restricted shares of the Company’s common
stock, vesting in three equal annual installments commencing on the one-year
anniversary of the grant date. Additionally, non-employee directors receive an
annual cash retainer of $30,000. The Chairperson of the Audit Committee and
Compensation Committee receive an additional annual cash retainer of $10,000 per
year. Non-employee directors also receive a cash fee of $1,000, plus travel
expenses, for attendance at each meeting of the Board of Directors.
Continuing
non-employee directors receive an annual stock award, either restricted stock or
stock options, the amount of which is determined by the Board of Directors in
its discretion. Generally, this award would be granted in January of
each year. In January 2008, the continuing non-employee directors each received
5,000 restricted shares of the Company's common stock, which vested in January
2009. Due to the limited availability of shares under the Company's 2005 Stock
Incentive Plan, the number of restricted shares awarded to each continuing
non-employee director in January 2008 was one-half of the number of shares
awarded in 2007.
In light
of the recent industry challenges facing the Company and its peers and the
reduced annual restricted stock award granted in January 2008, each of the
non-employee directors received an additional equity award in December 2008 of
options to purchase 50,000 shares of the Company's common stock at $2.05 per
share. These options vest in three equal annual installments commencing on the
one-year anniversary of the grant date. No stock compensation was
awarded to the directors in first-quarter 2009.
Directors
who are employees of the Company do not receive any additional compensation for
their services as directors. In January 2008, the Company engaged
Propensity/Hayes International to review the Company’s director compensation
program. To date, no changes to non-employee director compensation
have been made as a result of this review.
The
following table reflects the compensation paid to the Company’s non-employee
directors for 2008. The compensation paid to Mr. Sigmon, the
Company’s Chairman and Chief Executive Officer, is presented below in the 2008
Summary Compensation Table and the related explanatory tables.
2008
Director Compensation Table
Name
(a)
|
Fees
Earned or
Paid
in Cash
($)
(b)
|
Stock
Awards
($)
(1) (2)
(c)
|
Option
Awards
($)
(3) (4)
(d)
|
Total
($)
(h)
|
Alan
L. Edgar
|
40,000
|
101,908
|
53,206
|
195,114
|
|
|
|
|
|
Dennis
B. Fitzpatrick
|
50,000
|
219,908
|
53,206
|
323,114
|
|
|
|
|
|
Jon
Michael Muckleroy
|
50,000
|
219,908
|
53,206
|
323,114
|
|
|
|
|
|
Michael
J. Pint
|
41,000
|
101,908
|
53,206
|
196,114
|
|
|
|
|
|
Jacob
Roorda
|
28,500
|
156,444
|
53,206
|
238,150
|
|
|
|
|
|
Anthony
Tripodo
|
28,500
|
156,444
|
53,206
|
238,150
|
|
|
|
|
|
Robert
Foree, Jr. (5)
|
12,500
|
106,900
|
-
|
119,400
|
|
|
|
|
|
James
L. Hewitt (5)
|
11,500
|
159,741
|
-
|
171,241
|
|
|
|
|
|
(1)
|
These
amounts reflect the compensation expense recognized by the Company during
2008 for financial statement reporting purposes in accordance with FAS
123R for restricted stock awards, except no assumptions for forfeitures
were included, and includes restricted stock awards granted in 2006, 2007
and 2008. Additional information regarding the calculation of such
compensation expense is set forth in Note F of the Notes to Consolidated
Financial Statements of our 2008 Annual Report on Form 10-K, filed with
the SEC on March 16, 2009. Except for 26,666 shares of restricted
stock held by Mr. Hewitt, no forfeitures for the above named directors
occurred during 2008. As of December 31, 2008, Mr. Edgar held 5,000 shares
of restricted stock; Mr. Fitzpatrick held 18,333 shares of restricted
stock; Mr. Muckleroy held 18,333 shares of restricted stock; Mr. Pint held
5,000 shares of restricted stock; Mr. Roorda held 40,000 shares of
restricted stock; and Mr. Tripodo held 40,000 shares of restricted
stock.
|
|
|
(2)
|
In
January 2008, as continuing directors, each of Messrs. Edgar, Fitzpatrick,
Foree, Muckleroy and Pint received 5,000 restricted shares of the
Company's common stock. The grant date fair value of these restricted
stock awards computed in accordance with FAS 123R was $59,900 each. In
January 2008, Mr. Hewitt received 40,000 restricted shares of the
Company's common stock with a three year vesting schedule and a fair value
of $479,200. These restricted stock awards vest on the one-year
anniversary of their grant date, except that the vesting of Mr. Foree's
shares and 13,334 of Mr. Hewitt's shares were accelerated under the terms
of the settlement agreement with Third Point in March 2008. The remaining
26,666 shares of restricted stock held by Mr. Hewitt were forfeited upon
his resignation from the Board in March 2008.
In
March 2008, as new directors, each of Messrs. Roorda and Tripodo received
40,000 restricted shares of the Company's common stock. The grant date
fair value of these restricted stock awards computed in accordance with
FAS 123R was $512,000 each. These restricted stock awards vest in three
equal annual installments commencing on the one-year anniversary of the
grant date.
The
Company does not currently expect to pay dividends on its common
stock.
|
|
|
(3)
|
These
amounts reflect the compensation expense recognized by the Company during
2008 for financial statement reporting purposes in accordance with FAS
123R for stock option awards, except no assumptions for forfeitures were
included, and includes stock option awards granted in 2008.
Additional information regarding the calculation of such compensation
expense is set forth in Note F of the Notes to Consolidated Financial
Statements of our 2008 Annual Report on Form 10-K, filed with the SEC on
March 16, 2009. No forfeitures for the above named directors
occurred during 2008. As of December 31, 2008, each of Messrs.
Edgar, Fitzpatrick, Muckleroy, Pint, Roorda and Tripodo held stock options
to purchase 50,000 shares of the Company's common
stock.
|
|
|
(4)
|
In
December 2008, each of Messrs. Edgar, Fitzpatrick, Muckleroy, Pint, Roorda
and Tripodo received stock options to purchase 50,000 shares of the
Company's common stock. The grant date fair value of these stock option
awards computed in accordance with FAS 123R was $53,206 each. These
options vest in three equal annual installments commencing on the one-year
anniversary of the grant date.
|
|
|
(5)
|
Messrs.
Foree and Hewitt left the Board in March 2008 as part of the settlement
agreement with Third Point LLC. See Item 13 of this Amendment No. 1 for
further discussion of this settlement
agreement.
|
Compensation Committee
Interlocks and Insider Participation
During
the 2008 fiscal year, none of the Company's executive officers served on the
compensation committee (or its equivalent) or board of directors of any entities
whose executive officers serve on the Company's Compensation Committee or Board
of Directors. No current or past executive officers of the Company serve on the
Compensation Committee. Other than Mr. Muckleroy's involvement with Millenium
E&P Resource Fund I, LLC, and Mr. Roorda's involvement with the Settlement
Agreement with Third Point, LLC, each as further discussed below under "Item 13
Certain Relationships and Related Transactions, and Director Independence," no
Compensation Committee member had any relationship requiring disclosure under
Item 404 of Regulation S-K of the Securities Exchange Act of 1934, as
amended.
Item
12. Security
Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters
Security
Ownership Of Certain Beneficial Owners
The
following table sets forth information concerning all persons known to the
Company to beneficially own more than five percent of the Company's common
stock, $0.01 par value per share, as of December 31, 2008, except that
Third Point LLC has been removed based on the liquidation of their position as
reported on its Schedule 13D/A filed with the SEC on March 19, 2009. Unless
otherwise indicated in the footnotes below, "beneficially own" means the sole
power to vote or direct the voting of a security and the sole power to dispose
or direct the disposition of a security.
Name
and Address of Beneficial Owner
|
Number
of Shares
Beneficially
Owned
|
|
Capital
Ventures International (1)
One
Capital Place
P.O.
Box 1787 GT
Grand
Cayman, Cayman Islands
British
West Indies
|
3,585,671
|
9.0%
|
Heartland
Advisors, Inc. (2)
789
North Water Street
Milwaukee,
WI 53202
|
3,311,400
|
9.1%
|
Barclays
Global Investors, NA (3)
400
Howard Street
San
Francisco, California 94105
|
2,254,625
|
6.18%
|
Credit
Suisse (4)
Uetlibergstrasse
231,
P.O.
Box 900,
CH
8070 Zurich, Switzerland
|
2,183,796
|
6.0%
|
Manulife
Financial Corporation (5)
200
Bloor Street, East,
Toronto,
Ontario, Canada, M4W 1E5
|
2,060,501
|
5.65%
|
Lazard
Asset Management, LLC (6)
30
Rockefeller Plaza
New
York, New York 10112
|
582,051
|
1.60%
|
NOTE:
The footnotes to this table are on the next
page.
|
(1) Information
relating to Capital Ventures International is based on its Schedule 13G/A,
filed with the SEC on February 13, 2009, on behalf of Capital Ventures
International and Heights Capital Management, Inc.
Capital Ventures
International and Heights Capital Management, Inc. share voting and
dispositive power over the 3,585,671 shares of the Company's common stock.
The shares reported as beneficially owned by Capital Ventures
International and Heights Capital Management, Inc. are issuable upon
conversion of (i) $39,409,000 of the Company's Series D Preferred
Stock and (ii) $15,000,000 of the Company's Series E Preferred Stock
(the "Preferred Shares"), which are both convertible into the Company's
common stock at an initial conversion price of $14.48 and $17.36 per
share, respectively; provided, that under the terms of the Preferred
Shares, a holder may not convert the Preferred Shares to the extent such
conversion would cause such holder, together with its affiliates, to
beneficially own a number of shares of the Company's common stock which
would exceed 9.99% of the Company's then outstanding shares of common
stock following such conversion, excluding for purposes of such
determination shares of the Company's common stock issuable upon
conversion of the Preferred Shares which have not been converted. Heights
Capital Management, Inc. serves as the investment manager to Capital
Ventures International and as such may be deemed to be the beneficial
owner of all shares owned by Capital Ventures International. Capital
Ventures International and Heights Capital Management, Inc. each disclaim
any beneficial ownership of such shares, except to the extent of any
pecuniary interest therein. Capital Ventures International converted $5
million of Series D Preferred Stock into 752,413 shares, including 407,109
make-whole shares, effective January 6, 2009. TXCO has no knowledge as to
whether they still hold these common shares. In March 2009, Capital
Ventures International presented a redemption demand for the Series D and
Series E shares that they held after the conversion. The redemption right
is suspended until all of the Company's obligations under its senior
indebtedness agreements are satisfied in full.
|
|
(2) Information
relating to Heartland Advisors, Inc. is based on its Schedule 13G, filed
with the SEC on February 11, 2009, on behalf of Heartland Advisors, Inc.
and William J. Nasgovitz, an individual. Heartland Advisors, Inc. and Mr.
Nasgovitz share voting power of 3,214,950 shares and dispositive power of
3,311,400 shares of the Company's common stock. The shares may be deemed
beneficially owned by Heartland Advisors, Inc. by virtue of its investment
discretion and voting authority granted by certain clients, which may be
revoked at any time; and Mr. Nasgovitz as a result of his ownership
interest in Heartland Advisors, Inc. Heartland Advisors, Inc. and Mr.
Nasgovitz each specifically disclaim beneficial ownership of any shares
reported on the Schedule. The clients of Heartland Advisors, Inc., a
registered investment adviser, including an investment company registered
under the Investment Company Act of 1940 and other managed accounts, have
the right to receive or the power to direct the receipt of dividends and
proceeds form the sale of shares included on the Schedule 13G. The
Heartland Value Fund, a series of the Heartland Group, Inc., a registered
investment company, owns 2,500,000 shares or 6.9% of the class of
securities reported herein. The remaining shares disclosed in the Schedule
13G are owned by various other accounts managed by Heartland Advisors,
Inc. on a discretionary basis. To the best of Heartland Advisors'
knowledge, none of the other accounts own more than 5% of the Company's
outstanding common stock.
|
|
(3) Information
relating to Barclays Global Investors, NA is based on its Schedule 13G,
filed with the SEC on February 5, 2009 on behalf of Barclays Global
Investors, NA and certain affiliates and subsidiaries. The reporting
stockholders have sole voting power with respect to 1,969,909 shares and
sole dispositive power with respect to 2,254,625 of the Company's common
stock as follows: Barclays Global Investors, NA has sole voting power with
respect to 1,078,065 shares and sole dispositive power with respect to
1,362,781 shares and Barclays Global Fund Advisors has sole voting power
with respect to 891,844 shares and sole dispositive power with respect to
891,844 shares.
|
|
(4) Information
relating to Credit Suisse is based on its Schedule 13G, filed with the SEC
on February 17, 2009. Credit Suisse's 13/G indicates that Credit Suisse
has shared voting and shared dispositive power of 2,183,796 shares of the
Company's common stock. The ultimate parent company of Credit
Suisse is Credit Suisse Group ("CSG"), a corporation formed under the laws
of Switzerland. CSG, for purposes of the federal securities
laws, may be deemed ultimately to control Credit Suisse. CSG,
its executive officers and directors, and its direct and indirect
subsidiaries, may beneficially own the shares to which the 13G relates.
CSG disclaims beneficial ownership of the shares beneficially owned by its
direct and indirect subsidiaries, including Credit Suisse. Each
CSG's direct and indirect subsidiaries disclaim beneficial ownership of
the shares beneficially owned by Credit Suisse. Credit Suisse disclaims
beneficial ownership of the shares beneficially owned by CSG, and its
direct and indirect subsidiaries.
|
|
NOTE: The
footnotes to this table continue on the next page.
(5) Information
relating to Manulife Financial Corporation is based on its
Schedule 13G/A, filed with the SEC on February 11, 2009. Manulife
Financial Corporation's Schedule 13G/A indicates that MFC Global
Investment Management (U.S.A.) Limited has sole voting power and sole
dispositive power of 24,532 shares of the Company's common stock and MFC
Global Investment Management (U.S.), LLC has sole voting power and sole
dispositive power of 2,035,969 shares of the Company's common stock. MFC
Global Investment Management (U.S.A.) Limited and MFC Global Investment
Management (U.S.), LLC are indirect wholly owned subsidiaries of Manulife
Financial Corporation. Through its parent-subsidiary relationship to MFC
Global Investment Management (U.S.A.) Limited and MFC Global Investment
Management (U.S.), LLC, Manulife Financial Corporation may be deemed to
have beneficial ownership of shares owned by these
subsidiaries.
|
|
(6) Information
relating to Lazard Asset Management, LLC is based on its
Schedule 13G/A, filed with the SEC on February 10, 2009. Lazard Asset
Management's Schedule 13G/A indicates that it has sole voting power
only with respect to 562,008 shares and sole dispositive power with
respect to 582,051 shares of the Company's common
stock.
|
Security
Ownership Of Directors And Executive Officers
The
following table reflects information regarding beneficial ownership of the
Company's common stock, $0.01 par value per share, by each of its current
directors, each director nominee named in this Amendment No. 1, each named
executive officer set forth in the Summary Compensation Table and all of our
directors and executive officers as a group, as of March 31, 2009. Unless
otherwise indicated in the footnotes below, "beneficially owned" means the sole
power to vote or direct the voting of a security and the sole power to dispose
or direct the disposition of a security.
|
Number
of Shares Beneficially Owned (2)
|
|
Alan
L. Edgar (3)
|
82,000
|
0.21
|
|
Dennis
B. Fitzpatrick (4)
|
213,636
|
0.55
|
|
J.
Michael Muckleroy (5)
|
121,219
|
0.31
|
|
Michael
J. Pint (6)
|
260,000
|
0.67
|
|
Jacob
Roorda
|
80,000
|
0.21
|
|
Anthony
Tripodo
|
44,000
|
0.11
|
|
James
E. Sigmon (7)
|
455,238
|
1.18
|
|
Gary
S. Grinsfelder
|
106,190
|
0.28
|
|
P.
Mark Stark (8)
|
97,501
|
0.25
|
|
James
J. Bookout
|
72,713
|
0.19
|
|
M.
Frank Russell
|
51,905
|
0.13
|
|
Roberto
R. Thomae (9)
|
150,201
|
0.39
|
|
All
Directors and Executive Officers as a group
(13
people) (10)
|
1,754,238
|
4.53
|
|
NOTE:
The footnotes to this table are on the next
page.
|
(1) Unless
otherwise indicated, the mailing address for each of the individuals is
777 E. Sonterra Blvd., Suite 350, San Antonio, Texas
78258.
|
|
(2) In
accordance with SEC rules, this column includes shares that may be
acquired pursuant to stock options that are or will become exercisable
within 60 days as follows: 25,000 for Mr. Bookout, 50,000 for
Mr. Stark, and 100,000 for Mr. Thomae. This column also includes
unvested restricted shares of the Company's common stock as follows:
26,667 for Mr. Roorda, 26,667 for Tripodo, 20,001 for Mr. Stark,
20,001 for Mr. Russell, 20,001 for Mr. Bookout, 20,001 for Mr.
Thomae, and 98,334 for Mr. Grinsfelder. The holders of the unvested
shares of restricted stock have no investment or voting power with respect
to such shares. Mr. Edgar, Mr. Fitzpatrick, Mr. Muckleroy, Mr. Pint, Mr.
Roorda & Mr. Tripodo each currently hold options to purchase 50,000
shares of TXCO stock at $2.05 that become exercisable in December
2009.
|
|
(3) Includes
(i) 3,900 shares held by Mr. Edgar's immediate family member,
for which Mr. Edgar has neither investment nor voting power and
disclaims beneficial ownership, and (ii) 73,100 shares held in Mr.
Edgar's Individual Retirement Account.
|
|
(4) Includes
(i) 83,997 shares held in Mr. Fitzpatrick's Individual
Retirement Account, (ii) 68,478 shares held in the Fitzpatrick Living
Trust and (iii) 20,037 shares held by the D. B. Fitzpatrick & Co.,
Inc. Profit Sharing Plan.
|
|
(5) Includes
(i) 15,000 shares held by Mr. Muckleroy's immediate family
member, (ii) 31,334 shares held in Mr. Muckleroy's Individual Retirement
Account and (iii) 56,552 shares held by M. P. Phoenix Holdings LTD (100%
owned by Mr. Muckleroy).
|
|
(6) Includes
(i) 45,000 shares held in Mr. Pint's Individual Retirement
Account.
|
|
(7) Includes
(i) 9,980 shares held in Mr. Sigmon's Individual Retirement
Account, and (2) 4,420 shares held in Mr. Sigmon's immediate
family member's Individual Retirement Account for which Mr. Sigmon has
neither investment nor voting power and disclaims beneficial
ownership.
|
|
(8) Includes
300 shares held by Mr. Stark's immediate family member, for which
Mr. Stark has neither investment nor voting power and disclaims
beneficial ownership, and 450 shares in Mr. Stark's Individual Retirement
Account.
|
|
(9) Includes
500 shares beneficially owned by Mr. Thomae that are pledged as
security in a margin account.
|
|
(10) Includes
175,000 shares that may be acquired pursuant to stock options that are or
will become exercisable within 60 days; 243,339 shares of restricted
common stock, for which the holders have neither investment nor voting
powers; and 23,620 shares for which the holders have neither investment
nor voting powers and disclaim beneficial
ownership.
|
Equity
Compensation Plan Information
The
following table provides information as of December 31, 2008, relating to TXCO's
equity compensation plans pursuant to which grants of options, restricted stock
or other rights to acquire shares may be granted from time to time.
Plan
category
(securities
in thousands)
|
|
Number
of securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
(a)
|
Weighted-average
exercise
price of
outstanding
options,
warrants
and rights
(b)
|
Number
of securities remaining
available
for future issuance
under
equity compensation
plans
(excluding securities
reflected
in column (a))
(c)
|
Equity
compensation plans approved
by security holders
(1)
|
|
|
|
Equity
compensation plans not approved
by security
holders
|
|
|
|
|
|
|
|
(1) The
plans are the 2005 Stock Incentive Plan and the Overriding Royalty Purchase
Plan.
(2) 2,396,613 shares may be issued in the form of restricted stock.
Under the current terms of the 2005 Stock Incentive Plan, the maximum number of
shares of the Company's common stock that are available for awards under
this plan is limited to 10% of the total number of the Company's issued and
outstanding shares of common stock. The ORPP provides for up to 3 million
shares to be issued to purchase all or a portion of Mr. Sigmon's right to an
overriding royalty interests in existing or future oil and natural gas
properties of the Company.
Item
13. Certain Relationships and
Related
Transactions, and Director Independence
Generally,
as set forth in the Audit Committee Charter, the Audit Committee is charged with
the responsibility of reviewing and pre-approving all "related-person
transactions" (as defined in Item 404 of Regulation S-K promulgated by
the SEC). Related-person transactions are also periodically reassessed to ensure
their continued appropriateness. As required under SEC regulations,
"related-person transactions" are disclosed in the Company's Amendment No. 1. In
the course of its review of a "related-person transaction," the Audit Committee
considers:
•
The nature of the related person's interest in
the transaction;
|
•
The material terms of the transaction, including,
without limitation, the amount and type of
transaction;
|
•
The importance of the transaction to the related
person;
|
•
Whether the transaction would impair the judgment
of a director or executive officer to act in the best interest of the
Company; and
|
•
Any other matters the Audit Committee deems
appropriate.
|
During
the fourth quarter of 2008, the Company entered into a joint exploration
agreement ("JEA") with Millenium E&P Resource Fund I, LLC ("Millenium"). The
agreement calls for Millenium to provide $825,000 in initial funds for the
drilling and completion of a well to test the Georgetown formation in the Burr
"C" project. The JEA also provides the options for Millenium to participate in
up to two additional wells. In each well, Millenium will fund 100% of the cost
of drilling and completion and will earn a 50% working interest in the well.
TXCO will serve as operator on the wells covered by the JEA. Jon Michael
Muckleroy, an outside director of the Company and a member of our Compensation
Committee, serves as chief executive officer of Millenium and will receive a
1.1875% working interest following payout of any successful well drilled under
the JEA.
In 1994,
James E. Sigmon, TXCO's Chief Executive Officer, agreed to reduce his annual
base salary. In recognition of this forfeiture, the Company granted Mr. Sigmon a
1% overriding royalty interest ("ORRI") in certain oil and natural gas leases of
the Company. In 1996, this grant was amended to include all oil and natural gas
leases acquired or to be acquired by the Company. The ORRI was determined to
have little or no value at the time of grant, and royalties related to the ORRI
were almost non-existent. The Company has pursued the possible acquisition of
the ORRI; however, such an agreement was never reached and the ORRI remains in
place as originally granted. Royalty earnings by Mr. Sigmon related to the ORRI
totaled approximately, $1,880,000 in 2008, $1,172,000 in 2007 and $982,000 in
2006. Included in undistributed revenue is $523,000 at December 31, 2008, and
$175,000 at December 31, 2007, due Mr. Sigmon for this ORRI.
On
March 15, 2008, the Company and Third Point, LLC, a Delaware limited
liability company, et al. entered into a Settlement Agreement with respect to a
lawsuit pending in the Delaware Court of Chancery and a related proxy contest in
which Third Point sought to seat three directors on TXCO’s Board of
Directors. Under the Settlement Agreement TXCO agreed, among other
things, to pay Third Point's reasonable, documented out-of-pocket costs and
expenses up to $500,000 and to add Mr. Jacob Roorda and Mr. Anthony Tripodo to
its Board of Directors and retain them as long as Third Point had at least a 5%
stock ownership position in the Company's common stock. Mr. Roorda currently
serves as a member of our Compensation Committee. Third Point has liquidated
their position, as reported on
its Schedule 13D/A filed
with the SEC on March 19, 2009. The foregoing reference to the Settlement
Agreement does not purport to be complete and is qualified by reference to the
complete text of the Settlement Agreement, which is attached as Exhibit 10.1 of
the Company’s Current Report on Form 8-K filed with the SEC on March 19, 2008
and incorporated by reference herein in its entirety. The Board of
Directors approved the Settlement Agreement.
Director
Independence
The
Company’s Board of Directors currently consists of seven directors, one of whom
serves as our Chief Executive Officer and six of whom the Board of Directors has
determined to be independent in accordance with the Nasdaq listing standards.
Applying these independence standards, the Board of Directors has determined
that Messrs. Fitzpatrick, Muckleroy, Edgar, Pint, Roorda, and Tripodo are
all independent directors. The Board of Directors also determined that former
directors Robert L. Foree, Jr. and James L. Hewitt were also independent. After
due consideration, the Board of Directors has determined that none of these
directors has a relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director and they
all meet the criteria for independence under the Nasdaq listing standards. In
making such determination, the Board of Directors considered the Company’s joint
exploration agreement with Millenium and Mr. Muckleroy’s position with
Millenium, as described above. The Board of Directors determined that that the
Company had a customary relationship with Millenium that was carried on in the
ordinary course of business on an arms-length basis and that such relationship
did not preclude Mr. Muckleroy from being deemed independent under the Nasdaq
listing standards and did not otherwise interfere with his exercise of
independent judgment in carrying out his responsibilities as a
director.
Item
14. Principal
Accountant Fees and
Services
The Audit
Committee or its chairperson pre-approves all audit and non-audit services. In
connection with the Audit Committee's pre-approval policy, the Audit Committee
requires periodic reports as to year-to-date fees and ongoing status of
engagements; specific identification of prohibited services; specific advance
notification; and proposed project descriptions, fees and time estimates. The
chairperson of the Audit Committee has the authority to pre-approve any audit
and non-audit services, subject to review by the full Audit Committee at its
next regularly scheduled meeting. The Audit Committee or its chairperson
approved all services provided by Akin, Doherty, Klein & Feuge, P. C.
("ADKF") during the 2008 and 2007 fiscal years. These services are provided
below.
Audit
Fees
. ADKF's fees were $165,000 and $129,957, for 2008 and
2007, respectively, for its independent audit of our annual financial statements
and the review of the financial statements contained in our quarterly reports on
Form 10-Q. In addition, these services included the audit of the
Company's internal control over financial reporting.
Audit-Related
Fees
. ADKF's fees were
$6,000 and $4,630 for
2008 and 2007, respectively, for its review of information related to stock
offerings, registration statements and new accounting
pronouncements.
Tax
Fees
. ADKF's fees were $52,813 and $30,555 for 2008 and 2007,
respectively, for its professional services related to federal and state tax
compliance, tax advice and tax planning.
All Other
Fees
. ADKF's fees were $17,450 and $35,387 for 2008 and 2007,
respectively, for its professional services related to research and due
diligence on proposed transactions and other immaterial items.
The Audit
Committee has considered whether the non-audit services provided by ADKF,
including the services rendered in connection with income tax consultation, were
compatible with maintaining ADKF's independence and has determined that the
nature and substance of the limited non-audit services did not impair the status
of ADKF as the Company's independent registered public accounting
firm.
PART
IV
Item
15.
Exhibits and Financial Statement
Schedules
(A) The
following documents were filed on March 16, 2009, as part of the annual report
on Form 10-K after the signature page, commencing on page F-1.
(1)
|
Consolidated
Financial Statements:
|
|
Report
of Independent Registered Public Accounting Firm.
|
|
Consolidated
Balance Sheets, December 31, 2008 and December 31,
2007.
|
|
Consolidated
Statements of Operations, Years Ended December 31, 2008, 2007 and
2006.
|
|
Consolidated
Statements of Stockholders' Equity, Years Ended December 31, 2008, 2007
and 2006.
|
|
Consolidated
Statements of Cash Flows, Years Ended December 31, 2008, 2007 and
2006.
|
|
Notes
to Audited Consolidated Financial Statements.
|
|
|
(2)
|
Financial
Statement Schedules.
|
|
Schedule
II - Valuation and Qualifying Reserves.
|
|
|
|
All
other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are omitted as the
required information is inapplicable or the information is presented in
the Consolidated Financial Statements or Notes
thereto.
|
(3)
|
Exhibits:
|
Exhibit
Number
|
Exhibit Description
|
Filed
Herewith
|
Form
|
|
Exhibit
|
Filing
Date
|
|
Agreement
and Plan of Merger, dated February 20, 2007, by and among Registrant,
Output Acquisition Corp., and Output Exploration,
LLC.
|
|
|
|
|
|
|
Amendment
No. 1 to Agreement and Plan of Merger listed in Exhibit 2.1
above.
|
|
|
|
|
|
|
Restated
Certificate of Incorporation of Registrant.
|
|
|
|
|
|
|
Certificate
of Designations, Preferences and Rights of Series D Convertible Preferred
Stock of Registrant.
|
|
|
|
|
|
|
Certificate
of Designations, Preferences and Rights of Series E Convertible Preferred
Stock of Registrant.
|
|
|
|
|
|
|
Amended
and Restated Bylaws of TXCO Resources Inc.
|
|
|
|
|
|
|
Specimen
common stock certificate.
|
|
|
|
|
|
|
Registration
Rights Agreement, dated November 20, 2007, among Registrant and the
parties listed therein.
|
|
|
|
|
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|
Rights
Agreement, dated June 29, 2000, between Registrant and Fleet National
Bank.
|
|
|
|
|
|
|
Agreement
of Substitution and Amendment of Common Shares Rights Agreement dated
November 1, 2007, between Registrant and American Stock Transfer and Trust
Company.
|
|
|
|
|
|
Exhibit
Number
|
Exhibit Description
|
Filed
Herewith
|
Form
|
|
Exhibit
|
Filing
Date
|
|
Amendment
No. 2 to Rights Agreement, between Registrant and American Stock Transfer
and Trust Company.
|
|
|
|
|
|
|
Registration
Rights Agreement, dated March 4, 2008, among Registrant and the parties
listed therein.
|
|
|
|
|
|
|
Amendment
No. 3 to Rights Agreement, between Registrant and American Stock Transfer
and Trust Company.
|
|
|
|
|
|
|
Upper
Call Option Transaction, dated February 28, 2008, between Registrant and
the investor named therein.
|
|
|
|
|
|
|
Lower
Call Option Transaction, dated February 28, 2008, between Registrant and
the investor named therein.
|
|
|
|
|
|
|
Upper
Call Option Transaction, dated April 4, 2008, between Registrant and the
investor named therein.
|
|
|
|
|
|
|
Lower
Call Option Transaction, dated April 4, 2008, between Registrant and the
investor named therein.
|
|
|
|
|
|
|
Employment
Agreement between Registrant and James E. Sigmon, dated October 1,
1984.
|
|
|
|
|
|
|
1995
Flexible Incentive Plan
|
|
|
|
|
|
|
Amendment
to the 1995 Flexible Incentive Plan.
|
|
|
|
|
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|
Amendment
to the 1995 Flexible Incentive Plan.
|
|
|
|
|
|
|
Amendment
to the 1995 Flexible Incentive Plan.
|
|
|
|
|
|
|
Form
of Amended and Restated Change of Control Letter
Agreement.
|
|
|
|
|
|
|
Form
of Restricted Stock Award.
|
|
|
|
|
|
|
Registration
Rights Agreement, dated April 4, 2006, between Registrant and several
investors named therein.
|
|
|
|
|
|
|
Amended
and Restated Credit Agreement, dated April 2, 2007, among Registrant, as
Borrower, Output Acquisition Corp., as a Guarantor, the other Guarantors
described therein, Bank of Montreal, as Lender and Administrative Agent
for the Lenders, the other Lenders party thereto, and BMO Capital Markets
Corp., as Arranger.
|
|
|
|
|
|
|
|
First
Amendment to the Amended and Restated Credit Agreement, dated July 25,
2007, among the same parties listed in Exhibit 10.9
above.
|
|
|
|
|
|
|
|
Amended
and Restated Term Loan Agreement, dated July 25, 2007, among the same
parties listed in Exhibit 10.9 above.
|
|
|
|
|
|
|
|
Senior
Secured Second Lien Term Loan Facility $20,000,000 Increased Facility
Amount Supplemental Commitment Letter, among the same parties listed in
Exhibit 10.9 above.
|
|
|
|
|
|
|
|
Securities
Purchase Agreement, dated November 20, 2007, among Registrant and the
parties listed therein.
|
|
|
|
|
|
|
|
Upper
Call Option Transaction, dated November 20, 2007, between Registrant and
the investor named therein.
|
|
|
|
|
|
|
|
Lower
Call Option Transaction, dated November 20, 2007, between Registrant and
the investor named therein.
|
|
|
|
|
|
|
|
Supplemental
fee letter dated January 14, 2008, among Registrant, BMO Capital Markets
and Bank of Montreal, et al.
|
|
|
|
|
|
|
Exhibit
Number
|
Exhibit Description
|
Filed
Herewith
|
Form
|
|
Exhibit
|
Filing
Date
|
|
Securities
Purchase Agreement dated February 28, 2008, by and among Registrant and
the parties listed therein.
|
|
|
|
|
|
|
Settlement
Agreement, dated March 15, 2008, among the Registrant, Third Point, Daniel
S. Loeb, and the other parties named therein.
|
|
|
|
|
|
|
Form
of Restricted Stock Award Agreement, dated March 18, 2008, for Messrs.
Jacob Roorda and Anthony Tripodo.
|
|
|
|
|
|
|
TXCO's
2005 Stock Incentive Plan, as amended and restated.
|
|
|
|
|
|
|
TXCO's
Overriding Royalty Purchase Plan.
|
|
|
|
|
|
|
Amended
and Restated Change in Control Letter Agreement for Gary
Grinsfelder.
|
|
|
|
|
|
|
Form
of Stock Option Award under TXCO's 2005 Stock Incentive
Plan.
|
|
|
|
|
|
|
Subsidiaries
of the Registrant at December 31, 2008
|
|
|
|
|
|
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Consent
of Akin, Doherty, Klein & Feuge, P.C.
|
|
|
|
|
|
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Consent
of DeGolyer and MacNaughton
|
|
|
|
|
|
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Consent
of Cobb & Associates
|
|
|
|
|
|
|
Certification
of Chief Executive Officer required pursuant to Rule 13a-14(a) and
15d-14(a) of the Securities Exchange Act of 1934, as
amended.
|
|
|
|
|
|
|
Certification
of Chief Financial Officer required pursuant to Rule 13a-14(a) and
15d-14(a) of the Securities Exchange Act of 1934, as
amended.
|
|
|
|
|
|
|
Certification
of Chief Executive Officer required pursuant to 18 U.S.C. Section 1350 as
required by the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
Certification
of Chief Financial Officer required pursuant to 18 U.S.C. Section 1350 as
required by the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
Management
contract or compensatory plan or arrangement.
|
|
This
exhibit shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, or otherwise subject to the liability of
that section, and shall not be deemed to be incorporated by reference into
any filing under the Securities Act of 1933 or the Securities Exchange Act
of 1934.
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this Amendment No. 1 to be signed
on its behalf by the undersigned, thereunto duly authorized.
April
30, 2009
|
By:
/
s/ James E.
Sigmon
|
|
James
E. Sigmon, Chief Executive Officer and
Chairman
of the Board
|
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