<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Sheridan Energy, Inc.
-----------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(a)(4) and 0-11.
1) Title of each class of securities to which transaction applies: _______
2) Aggregate number of securities to which transaction applies: __________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):_____________
4) Proposed maximum aggregate value of transaction:_______________________
5) Total fee paid:________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form of Schedule and the date of its filing.
1) Amount Previously Paid:_______________________________________________
2) Form, Schedule or Registration Statement No.:_________________________
3) Filing Party:_________________________________________________________
4) Date Filed:___________________________________________________________
<PAGE>
Sheridan Energy, Inc.
1000 Louisiana, Suite 800
Houston, Texas 77002
April 27, 1999
Dear Fellow Stockholder:
You are cordially invited to attend the second Annual Meeting of
Stockholders of Sheridan Energy, Inc. scheduled to be held on Tuesday, May 25,
1999 at the Doubletree Hotel at Allen Center, 400 Dallas Street, Houston, Texas
commencing at 9:00 a.m., Houston time. Your Board of Directors and Management
look forward to greeting personally those Stockholders able to attend.
At the meeting, Stockholders are being asked to elect a Board of seven
directors to serve for a term of one year and to transact such other business as
may properly come before the meeting.
It is important that your shares are represented at the meeting whether or
not you plan to attend. Accordingly, we request your cooperation by promptly
signing, dating and mailing the enclosed proxy in the envelope provided for your
convenience.
Sincerely,
Jeffrey E. Susskind
Chairman of the Board
<PAGE>
Sheridan Energy, Inc.
1000 Louisiana, Suite 800
Houston, Texas 77002
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 25, 1999
TO THE STOCKHOLDERS OF SHERIDAN ENERGY, INC.:
Notice is hereby given that the Annual Meeting of the Stockholders of
Sheridan Energy, Inc., a Delaware corporation (the "Company") will be held at
the Doubletree Hotel at Allen Center, 400 Dallas Street in Houston, Texas on May
25, 1999 commencing at 9:00 a.m. Houston time, for the following purposes:
A. To elect a Board of Directors of seven members having a term of one
year; and
B. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The stock transfer books will not be closed. Stockholders of record as of
the close of business on April 1, 1999 (the "Record Date") are entitled to
notice of, and to vote at, the Annual Meeting or any adjournment or adjournments
thereof, notwithstanding any transfer of stock on the books of the Company after
such Record Date.
You are cordially invited to attend the meeting in person. YOU ARE URGED
TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
Michael A. Gerlich
Secretary
Houston, Texas
April 27, 1999
<PAGE>
Sheridan Energy, Inc.
1000 Louisiana, Suite 800
Houston, Texas 77002
_______________
PROXY STATEMENT
_______________
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 1999
_______________
SOLICITATION AND VOTING RIGHTS
The accompanying Proxy is solicited by the Board of Directors of Sheridan
Energy, Inc., a Delaware corporation (the "Company") for use at the Annual
Meeting of Stockholders of the Company to be held on Tuesday, May 25, 1999 at
9:00 a.m. Houston time at the Doubletree Hotel at Allen Center, 400 Dallas
Street in Houston, Texas, or at any adjournment or adjournments thereof.
This Proxy Statement and Proxy and the accompanying Notice of Annual
Meeting, Annual Report to Stockholders, and Form 10-KSB for the year ended
December 31, 1998, including consolidated financial statements, will be mailed
to the Stockholders on or about April 27, 1999. The cost of soliciting proxies
in the enclosed form will be borne by the Company. The Board of Directors of
the Company has fixed April 1, 1999 as the record date (the "Record Date") for
determination of Stockholders entitled to receive notice of, and to vote at, the
Annual Meeting. As of the Record Date there were 6,731,276 shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"),
outstanding and entitled to vote. Each holder of Common Stock will be entitled
to one vote for each share owned. The presence, in person or by proxy, of the
holders of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum at the Annual Meeting. Proxies marked as abstaining
(including proxies containing broker non-votes) on any matter to be acted upon
by the Stockholders will be treated as present at the Annual Meeting for
purposes of determining a quorum but will not be counted as votes cast on such
matters. The seven persons receiving the greatest number of votes cast at the
Annual Meeting to fill the directorships with terms to expire at the 2000 Annual
Meeting of Stockholders will be elected as Directors of the Company. Thus,
abstentions and broker non-votes will have no effect on the election of
directors. Regarding other matters, under Delaware law, generally the vote of
Stockholders holding at least a majority of the voting power present at a
meeting in which a quorum is present is the act of the Stockholders.
Accordingly, abstentions will have the effect of negative votes with respect to
any such other matters but broker non-votes will have no effect on such matters.
The shares represented by each valid Proxy received by the Company on the form
solicited by the Board of Directors will be voted in accordance with the
instructions specified on the Proxy. Under Delaware law, any Stockholder giving
a duly executed proxy may revoke it before it is exercised by giving written
notice to the Secretary of the Company or by voting in person at the Annual
Meeting.
Reference is made to the caption "Election of Directors" for a discussion
of the Company's contractual obligation to place two persons on the Company's
Board of Directors who have been designated by Enron Capital & Trade Resources
Corp. ("ECT"). Messrs. Dunn and Childers are the ECT designees (the
"Designees"). Each has been nominated for election and are two of the nominees
set forth herein. In the event the Designees are not elected by the
Stockholders of the Company, the Board of Directors will be required to expand
the size of the Board of Directors and to name the Designees to fill the
expanded Board positions.
<PAGE>
BENEFICIAL OWNERSHIP OF SECURITIES
The following table reflects the holdings of the only persons known to the
Company to own beneficially five percent or more of the Company's Common Stock
or the Company's Series A Preferred Stock ($0.01 par value) (the "Preferred
Stock"):
Name and Address Amount and Nature of Percent of Class
of Beneficial Owner Beneficial Ownership on Record Date
- -------------------- -------------------- -----------------
Jeffrey and Janis Susskind 1,016,704 Common Stock 15.1%
FBO The Susskind Family Trust
100 Wilshire Boulevard, 15th Floor
Santa Monica, CA 90401/(1)/
AIF-Lion Group/(2)/ 911,100 Common Stock 13.5%
c/o Apollo Advisers L.P.
Two Manhattanville Rd.
Purchase, NY 10577
Enron Capital & Trade 2,600,000 Common Stock 37.8%
Resources Corp./(3)/ 1,067,500 Preferred Stock 100%
1400 Smith Street
Houston, TX 77002
Oppenheimer Funds, Inc./(4)/ 394,283 Common Stock 5.9%
Two World Trade Center
New York, NY 10048
Goldman, Sachs & Co./(5)/ 398,841 Common Stock 5.9%
85 Broad Street
New York, NY 10004
(1) Includes options to acquire 16,667 shares which are exercisable within 60
days of the Record Date.
(2) As reported in its Schedule 13D filed with the Securities and Exchange
Commission on February 27, 1995, such securities are held jointly by AIF
II, L.P. and Lyon Advisors, L.P., each a Delaware limited partnership. AIF
and Lyon are engaged in the business of managing investment funds while
serving as advisors and representatives for its clients.
(3) Includes warrants ("Warrants") exercisable at a price of $5.50 per share on
or before December 31, 2002 to acquire 150,000 shares of the Company's
Common Stock and 850,000 shares of Common Stock owned by Joint Energy
Development Investments Limited Partnership, a Delaware limited partnership
("JEDI") and 1,600,000 shares of the Company's Common Stock and, 1,067,500
shares of Preferred Stock held by Sundance Assets, L.P. ("Sundance"), a
Delaware limited partnership, Sundance, JEDI and ECT are affiliated
entities.
Entities that may be deemed to be control persons of JEDI are (a) Enron
Capital Management Limited Partnership, a Delaware limited partnership and
the general partner of JEDI ("ECMLP"), (b) Enron Capital Corp., a Delaware
corporation and the general partner of ECMLP ("ECC"), and (c) ECT. ECC is
a wholly-owned subsidiary of ECT, and an indirect, wholly-owned subsidiary
of Enron Corp., an Oregon corporation. ECT is a wholly-owned subsidiary of
Enron Corp.
2
<PAGE>
(4) In its Schedule 13G, Oppenheimer Funds, Inc. states that it is an
investment advisor and that it has shared dispositive power with respect to
394,283 shares of the Company's common stock (sole voting power being held
by Oppenheimer's Strategic Income Fund).
(5) In its Schedule 13G, Goldman, Sachs & Co. and the Goldman Sachs Group, L.P.
in their capacity as investment advisors state that they have sole voting
power as to no shares and shared voting and dispositive power as to 398,841
shares.
The following table sets forth the amounts and percentages of Common Stock
beneficially owned as of the Record Date by each nominee for election as a
Director of the Company, by each of the individuals named in the Summary
Compensation Table and by all Directors and Executive Officers of the Company as
a group. Beneficial ownership has been determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
does not necessarily bear on the economic incidents of ownership or the right to
transfer such shares:
Amount and Nature of
Beneficial Ownership
Name of Individual Shares of Common Stock Percent of Class
- --------------------------- -------------------------- ----------------
B. A. Berilgen/(1)/ 129,667 1.9%
Jonathan P. Carroll/(1)/ 53,333 *
Charles Chambers 500 *
W. Craig Childers/(2)/ 2,600,000 37.8%
D. Bradley Dunn/(2)/ 2,600,000 37.8%
Michael A. Gerlich/(1)/ 65,000 1.0%
David H. Scheiber/(1)/ 13,333 N/A
Jeffrey E. 1,016,704 15.1%
Susskind/(1)(3)/
Jon W. Wright, Jr./(4)/ -0- N/A
All Directors and
Executive Officers as
a Group
(9 persons including 3,878,537 54.8%
those named above)
* Less than 1%
(1) Includes 116,667, 13, 333, 40,000, 13,333 and 16,667 options held by
Messrs. Berilgen, Carroll, Gerlich, Scheiber and Susskind respectively,
which are or will become exercisable within the 60 days following the
Record Date.
(2) Mr. Dunn and Mr. Childers are employees of ECT. However, Messrs. Dunn and
Childers disclaim beneficial ownership of any shares owned directly or
indirectly by ECT and its affiliates. ECT also owns 100% of the Preferred
Stock to which Messrs. Dunn and Childers also disclaim beneficial
ownership. For information concerning the Common Stock and warrants owned
directly or indirectly by ECT and its affiliates, see footnote (3) to the
previous table.
(3) Includes 1,000,037 shares held by The Susskind Family Trust which is
controlled by Mr. Susskind and his wife.
(4) Mr. Wright resigned from the Company in February 1999.
3
<PAGE>
ELECTION OF DIRECTORS
Seven Directors are to be elected, each to hold office until the next
Annual Meeting of Stockholders and until his successor is elected and qualifies.
The persons named as proxies on the enclosed Proxy have been designated by the
Board of Directors and intend to vote, unless otherwise directed, for the
nominees listed below. In accordance with an agreement entered into between the
Company and ECT in 1997, ECT was given the right to require the Company to name
two ECT designees to the Board of Directors. ECT made such request in 1998 and
as a result, the Board of Directors increased the Board from five to seven
members and elected Messrs. Dunn and Childers to serve until the Annual Meeting.
In accordance with an agreement entered into among ECT, JEDI, JEDI I, and
Mr. and Mrs. Jeffrey Susskind acting on behalf of The Susskind Family Trust, the
Susskind's have agreed to vote their 1,000,037 shares equal to 14.9% of the
outstanding shares of Common Stock for the Designees. ECT has, conversely,
agreed to vote its 2,450,000 shares or 36.4% of the outstanding Common Stock for
the nominees listed below.
Although the Board of Directors does not contemplate that any of the
nominees will be unable to serve, if such a situation arises prior to the Annual
Meeting, the persons named on the enclosed Proxy will vote in accordance with
their best judgment for a substitute nominee.
The following table sets forth for each nominee his name, age, principal
occupation and employment for the past five years, offices held with Sheridan
and the date he first became a director. Each of the directors may be contacted
at the Company's address set forth on the Notice of Annual Meeting.
<TABLE>
<CAPTION>
Position, Principal Occupation, Business Direct or
Nominees Age Experience and Directorships Held Since/(1)/
- ----------------------- ----- ---------------------------------------------- -----------
<S> <C> <C> <C>
B. A. Berilgen............ 51 Mr. Berilgen is currently President and Chief 1997
Executive Officer of the Company. He joined
the Company in June 1997. Prior thereto he
was Vice-President and Chief Technical
Officer with Forest Oil Company, a position
he held from January to June 1997. From
1992 to January 1997, he was Vice President
of Operations in charge of field operations,
reservoir engineering and domestic and
international development, exploration and
acquisition functions.
Jonathan P. Carroll....... 37 Mr. Carroll has served on the Board since the 1997
merger (the "Merger") of the Company with TGX
Corporation ("TGX") in 1997. He is currently
President of a privately owned investment
management company. He was previously
President of Enserch Energy Services, Inc.,
and from 1991 until 1995, President and CEO
of DGS Holdings Corp., an oil and gas
marketing company. He has also served as a
Vice President at Manufacturers Hanover Bank
and Head Trader in the Capital Markets Group
of First Interstate Bank, Ltd.
W. Craig Childers/(2)/.... 50 Mr. Childers has been a Director of the 1998
Company since February 1998. He was a
Principal in Canberras Energy Associates from
January 1, 1993 through May 15, 1994.
Mr. Childers was Vice President of Enron
Capital & Trade Resources from May 1994
through January 1998 and has been a Managing
Director of the same company since January
1998.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Position, Principal Occupation, Business Direct or
Nominees Age Experience and Directorships Held Since/(1)/
- ----------------------- ----- ---------------------------------------------- -----------
<S> <C> <C> <C>
D. Bradley Dunn/(2)/...... 35 Mr. Dunn is a Vice President of ECT and has 1998
held various positions with ECT since
September of 1994. Prior to this Mr. Dunn
worked as a Petroleum Engineer with Delhi Gas
Pipeline Corporation and Mobil Oil
Corporation.
Michael A. Gerlich........ 44 Mr. Gerlich has been Vice President and Chief 1997
Financial Officer of the Company since the
Merger, and was elected Secretary in May
1998. He was elected Vice President and
Chief Financial Officer of TGX in December
1994. In April 1997 he was appointed interim
President. From January 1993 until joining
TGX, he owned and managed Chalk Hill
Resources, Inc., an independent oil and gas
investing and financial consulting company.
Prior thereto, he was Executive Vice
President from January 1989 to December 1992
and Vice President of Finance from May 1982
to December 1988 for Trinity Resources, Inc.,
an independent public oil and gas company.
David H. Scheiber......... 40 Mr. Scheiber has been a principal of Cana 1995
Capital, LLC, a private investment company,
since September 1992. From April 1996
through May 1997, Mr. Scheiber was a
principal of Chesapeake Bay Investors,
L.L.C., a registered investment advisor in
Baltimore, Maryland. From September 1991 to
August 1992, Mr. Scheiber was affiliated with
Monitor Company, Inc., a management
consulting firm headquartered in Boston,
Massachusetts, as manager of its bankruptcy
practice. From April 1997 until December 1997
Mr. Scheiber was a member of the Board of
Directors of Tuneup Masters, Inc.
Jeffrey E. Susskind....... 45 Mr. Susskind is engaged in personal 1992
investments and is an investment consultant.
For the five years prior to 1999 he was a
principal of Strome, Susskind Investment
Management, L.P., an investment management
company in Santa Monica, California.
</TABLE>
(1) Includes time served as a director of TGX
(2) In the event Messrs. Dunn and Childers are not elected by the Stockholders
at the Annual Meeting, the Board of Directors, upon request by ECT, would
be required to increase the Board of Directors by two and to place on the
Board those persons designated by ECT. Upon reduction of ECT's ownership
of Common Stock below 14%, ECT's right to designate directors reduces to
one and, upon a further reduction below 7%, ECT no longer retains the right
to designate a director. At such times, one or more of the ECT designees
will resign from the Board.
5
<PAGE>
Only those directors who are not employees of the Company are entitled to
receive a fee, plus reimbursement for reasonable travel expenses incurred in
conjunction with meetings. Under the Company's standard arrangement for
compensation of directors, directors receive a retainer fee of $833 per month
plus a meeting fee of $1,000 per day and $250 for each telephone meeting. The
monthly retainer fee is subject to forfeiture on a six-month prospective basis
if a director attends less than 75% of the meetings. In addition, while the
Company has not adopted a formal policy, it is the intention of the Company to
grant to all nonemployee directors options to acquire Common Stock. As a
result, in 1998 Messrs. Susskind, Carroll and Scheiber were granted options to
acquire 25,000, 20,000, and 20,000 shares of stock, respectively. Such options
vest over three years and are exercisable for a ten year period. The Designees
have elected to waive any right to stock options. Twelve meetings of the Board
were held in the last fiscal year. No incumbent director attended fewer than
75% of the meetings of the Board held in the last fiscal year after his election
as a Director. The Designees have elected to waive all Director fees for 1998.
The Board has a standing Audit Committee which met one time during 1998.
The Audit Committee consists of Messrs. Carroll, Scheiber and Dunn. The Audit
Committee assists the Board in fulfilling its fiduciary responsibilities with
respect to the accounting policies and reporting practices of the Company and
the sufficiency of the audits of all Company activities. It is the Board's agent
in ensuring the integrity of financial reports of the Company, and the adequacy
of disclosures to shareholders. The Audit Committee is the focal point for
communication between the directors, the independent accountants and management
as their duties relate to financial accounting, reporting, and controls.
The Board has a standing Compensation Committee which met four times during
the last fiscal year, and consists of Messrs. Carroll, Childers and Susskind.
During the year, the Compensation Committee consulted with management regarding
the compensation and benefits that are provided to the directors, officers and
employees of the Company.
The Board has a standing Executive Committee which did not meet during the
last fiscal year. The Executive Committee is authorized to exercise all of the
powers of the Board of Directors except those not permitted by the General
Corporation Law of Delaware. In 1998, the Executive Committee consisted of
Messrs. Susskind, Berilgen and Gerlich.
SECTION 16(a) - BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's Executive Officers and Directors and persons who own more
than ten percent of a registered class of the Company's equity securities to
file initial reports of ownership and changes in ownership with the SEC. Such
Officers, Directors and stockholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file. Based solely on a
review of the copies of such forms furnished to the Company and written
representations from the Company's Executive Officers and Directors, all persons
subject to the reporting requirements of Section 16(a) filed the required
reports on a timely basis.
6
<PAGE>
EXECUTIVE OFFICERS
For information regarding the Executive Officers of the Company, see
"Election of Directors." Pursuant to the Company's Bylaws, the officers serve
at the discretion of the Board and may be removed, with or without cause, at any
time.
EMPLOYMENT AGREEMENTS
The Company entered into an Employment Agreement dated and effective as of
June 5, 1997 which was subsequently amended in 1998, with Mr. B. A. Berilgen
(the "Berilgen Agreement"). Pursuant to the Berilgen Agreement, Mr. Berilgen
has been retained as President and Chief Executive Officer of the Company for a
term ending December 31, 2000, which may be extended on an annual basis unless
terminated by either party. Pursuant to the Berilgen Agreement, Mr. Berilgen
receives a base salary of $200,000 per annum subject to the Compensation
Committee's annual review, and annual discretionary bonuses. Beginning January
1, 2000, such base salary may be increased to $225,000 per annum to the extent
certain financial objectives are met. As a result of the Berilgen Agreement,
Mr. Berilgen was granted options to acquire 175,000 shares of the Company's
Common Stock at an option exercise price of $2.50 per share. The Berilgen
Agreement can be terminated at any time by the Company, but if terminated for
any reason other than for "cause," the Company is obligated to pay the full
amount that Mr. Berilgen is entitled to under the Berilgen Agreement with a
minimum of one-year's base salary as severance. Mr. Berilgen would also be
entitled to receive such payments upon a change of control which, without his
consent, results in a significant diminishment in the nature of Mr. Berilgen's
employment.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of the Chief Executive Officer of the Company, and of the Company's
most highly compensated executive officers (other than the CEO) whose total
annual salary and bonus exceeded $100,000, for each of the Company's fiscal
years ending December 31, 1998, 1997 and December 31, 1996. No other officers
earned in excess of $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation Awards
------------------- --------------------
Annual Compensation Compensation Awards
------------------- --------------------
Securities
Underlying All
Name and Options/ Other
Principal Position Year Salary($)/(1)/ Bonus($)/(2)/ SARs(#) Compensation ($)
- ------------------ ---- --------------- --------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
B. A. Berilgen 1998 240,000 75,000 125,000 --
President and CEO/(3)/ 1997 98,000 50,000 175,000 --
Michael A. Gerlich/(4)/ 1998 151,000 10,000 -- --
Vice-President & CFO 1997 133,000 30,000 60,000 3,000/(3)/
1996 120,000 12,000 -- 3,000/(3)/
Charles Chambers/(5)/ 1998 93,000 50,000 40,000 --
Vice President
Corporate Development
Jon W. Wright, Jr./(6)/ 1998 112,000 -- -- --
Secretary 1997 101,000 16,000 3,000 --
</TABLE>
(1) Includes perquisites and other benefits, unless the aggregate amount of
such does not exceed the lesser of either $50,000 or 10% of the total
annual salary and prior year bonus reported for the named executive
officer. See "Employment Agreements."
(2) Bonus was granted for year shown and paid in January following the year of
grant.
(3) Mr. Berilgen commenced his employment effective June 5, 1997.
(4) Mr. Gerlich acted as interim President from April 1997 to June 1997. The
$3,000 of "All Other Compensation" represents estimated compensation value
recognized related to restricted stock awards upon vesting.
(5) Mr. Chambers became an employee in June 1998. Includes amounts paid to Mr.
Chambers as a consultant in 1998, prior to his becoming an employee of the
Company.
(6) Mr. Wright resigned from the Company in February 1999. At such time all
outstanding options were forfeited.
8
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The following table sets forth information concerning individual grants of
stock options under the 1997 Flexible Incentive Plan to each of the Executive
Officers named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-----------------
Potential Realizable
Value at Assumed
% of Total Annual Rates of Stock
Number of Options Price Appreciation for
Securities Granted to Exercise Option Term/(1)/
Underlying Employees in Price Expiration --------------------
Name Options Granted Fiscal Year Per Share/(2)/ Date 5% 10%
----- --------------- ----------- ------------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
B. A. Berilgen................. 125,000(3) 40.5 $3.12/(4)/ 12/28/08 $245,662 $622,556
Michael A. Gerlich............. 0 N/A N/A N/A N/A N/A
Charles Chambers............... 20,000 6.5 $3.00 08/04/08 37,734 95,625
20,000 6.5 $3.12/(4)/ 12/28/08 39,396 99,609
Jon W. Wright, Jr./(5)/........ 5,000 1.6 $3.75 05/15/99
</TABLE>
* Less than one percent
(1) The Company does not believe that the value estimated herein, or any other
model, will necessarily be indicative of the values to be realized by an
executive.
(2) The exercise price may be paid in cash or in shares of Common Stock.
(3) Such options become exercisable at the rate of 25% per year on each of the
first four anniversaries of the date of grant, provided that the officer
remains employed by the Company.
(4) The exercise price of these options increases by 10% on each anniversary of
their grant.
(5) Mr. Wright resigned from the Company in February 1999. All options are
forfeited to the Company, three months after such resignation.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END VALUES
The following table sets forth information concerning each exercise of
stock options during the last completed fiscal year by each of the Executive
Officers named in the Summary Compensation Table and the fiscal year end value
of unexercised options.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1998 December 31, 1998($)/(1)/
Acquired on Value ------------------------- -------------------------
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- --------------------- --------------- --------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
B. A. Berilgen 0 N/A 116,667 / 183,333 72,917 / $36,458
Michael A. Gerlich 0 N/A 40,000 / 20,000 25,000 / 12,500
Charles Chambers 0 N/A - / 40,000 - / 2,500
Jon W. Wright, Jr. 0 N/A 3,750 / 4,250 - / -
</TABLE>
(1) Based on a closing stock price on the Nasdaq Small-Cap Market of $3.12 per
share on December 31, 1998.
9
<PAGE>
Compensation Committee Interlocks and Insider Participation
No non-employee director is or has been an officer or employee of the
Company or had any relationship requiring disclosure pursuant to Item 404 of the
SEC Regulation S-K. No executive officer of the Company served as a member of
the compensation committee (or other board committee performing similar
functions or, in the absence of any such committee, the entire board of
directors) of another corporation, any of whose executive officers served on the
Company's Compensation Committee. No executive officer of the Company served as
a director of another corporation, one of whose executive officers served on the
Company's compensation committee. No executive officer of the Company served as
a member of the compensation committee (or other board committee performing
equivalent functions or, in the absence of any such committee, the entire board
of directors) of another corporation, one of whose executive officers served as
a director of the Company.
Report On Executive Compensation
We are pleased to present this report to stockholders on executive
compensation. This report summarizes the responsibilities of certain of the
Company's non-employee directors who are the members of the Compensation
Committee (the "Committee"). Such Committee establishes the compensation
policies and objectives that guide the development and administration of the
executive compensation program and provide the basis on which the compensation
for the Chief Executive Officer, corporate officers and other key executives was
determined for the fiscal year ended December 31, 1998.
During the fiscal year, the Committee was comprised of the following Board
members, all of whom were non-employee directors of the Company: Jonathan P.
Carroll, W. Craig Childers and Jeffrey E. Susskind. The Committee's
responsibilities are to oversee the development and administration of the
compensation program for corporate officers and subsidiary presidents, and
administer the executive incentive and stock option plans. During fiscal year
1998, the Committee also reviewed market compensation trends for outside
directors.
The objective of the executive compensation program is to create strong
financial incentives for corporate officers and managers to increase profits and
grow revenues. The following objectives guide the Committee in its
deliberations:
. Provide a competitive compensation program that enables the Company to
attract and retain key executives and Board members.
. Assure a strong relationship between the performance results of the
Company and the total compensation received.
. Balance both annual and longer term performance objectives of the
Company.
. Encourage executives to acquire and retain meaningful levels of equity
ownership in the Company.
. Work closely with the Chief Executive Officer to assure that the
compensation program supports the management style and culture of the
Company.
In addition to normal employee benefits, the executive total compensation
program includes base salary, annual cash bonus compensation, and longer term
stock based grants and awards.
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Section 162(m) of the Internal Revenue Code imposes a $1,000,000 limit,
with certain exceptions, on the deductibility of compensation paid to each of
the five highest paid executives. In particular, compensation that is determined
to be "performance based" is exempt from this limitation. To be "performance
based," incentive payments must use predetermined objective standards, limit the
use of discretion in making awards, and be certified by the Compensation
Committee made up of "outside directors." While the Committee intends to comply
with the provisions of Section 162(m) with respect to the longer term stock
based incentives, it believes that the use of discretion in evaluating the
individual contributions of corporate management is appropriate. As such, the
Committee has taken no action to comply with Section 162(m) with respect to
annual incentive payments. It is not anticipated that any executive will receive
compensation in excess of this limit during 1999. The Committee will continue to
monitor this situation and will take appropriate action if it is warranted in
the future.
The base salary objective of the Committee is to target the median of a
primary comparison group for corporate officers. Primary market comparisons are
made to a broad group of oil and gas companies adjusted for size and job
responsibilities. Salary adjustments are based on an individual's experience,
background performance during the year, the general movement of salaries in the
marketplace and the Company's financial position. Similar criteria are used to
determine discretionary bonuses.
Stock ownership is encouraged through the use of stock option grants which
are made on a periodic basis.
The Chief Executive Officer participates in the executive compensation
program described in this report.
In establishing the total compensation program for Mr. Berilgen, the
Committee assessed the pay levels for CEOs in similar companies in the oil and
gas industry, Mr. Berilgen's efforts in seeking out growth opportunities for the
Company and controlling costs, and other relevant factors.
Respectfully submitted,
Jonathan P. Carroll
W. Craig Childers
Jeffrey E. Susskind
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MANAGEMENT RELATIONSHIPS AND TRANSACTIONS
As set forth above, during 1997, the Company entered into a series of
agreements with ECT, and Jeffrey E. Susskind, Chairman of the Board on behalf of
The Susskind Family Trust ("Susskind"), entered into further agreements with
ECT. Pursuant to the Company's agreements with ECT, in connection with the
acquisition of producing and non-producing oil and gas properties acquired from
Pioneer Natural Resources USA, Inc., ECT acquired 100% of the Company's
outstanding Preferred Stock in consideration for a payment of $10,000,000, and
further acquired 1,600,000 shares of Common Stock of the Company for a further
and additional payment of $10,000,000. The Preferred Stock has a cumulative
dividend which, if paid in cash, is in the amount of 12% per annum. However,
the Company has the option to pay such dividend with additional shares of
Preferred Stock. In such event, the Preferred Stock bears a dividend rate of
13.5% per annum. Shares of Preferred Stock are entitled to a liquidation
preference of $10 per share plus accrued, unpaid dividends, before any
distribution to holders of Common Stock on dissolution of the Company. The
Preferred Stock is fully redeemable before December 15, 1998, at a premium of
105% decreasing to 100% after December 15, 2001. The Preferred Stock must be
redeemed on or before December 15, 2002. In addition, upon certain defined
defaults by the Company, including failure to name two directors to the
Company's Board of Directors after the request of ECT or failure to pay the
appropriate dividend, the Preferred Stock is immediately redeemable. In
addition, at such time, the holders of the Preferred Stock will have right to
elect a majority of the Board of Directors. In connection with the issuance of
the Preferred and Common Stock to ECT, ECT agreed that, except in limited
circumstances or with the Company's permission, it would not acquire any
additional shares of the Company's Common Stock for a period of two years. In
addition, ECT, the Company and Susskind agreed that Susskind would vote its
shares in favor of the ECT nominees and, conversely, ECT would vote its shares
in favor of Susskind's nominees to the Board. In connection with the
transaction, ECT was granted certain registration rights including certain
demand and piggy-back registration rights. ECT's demand registration rights do
not become effective until the first anniversary of the agreement, and all
registration rights terminate when ECT's Common Stock ownership is reduced below
2% of the Company's outstanding shares.
On June 12, 1997, TGX Corporation merged with and into the Company. As a
result of such merger, TGX Shareholders owning Series A Senior Preferred Stock
were entitled to receive .5 shares of Sheridan Common Stock for each share of
TGX Series A Senior Preferred Stock they held on the date of the merger. As of
such date, Susskind held 1,778,002 shares of Series A Senior Preferred Stock.
In connection with the merger, all other preferred stockholders and common
stockholders of TGX received no shares of Sheridan and, as a result, their
interest in the assets of TGX was cancelled and they received no ongoing
interest in the Company. Mr. Susskind may be deemed to have had a conflict of
interest in recommending to the Stockholders of TGX that the merger be
consummated.
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OTHER MATTERS
As of the date of this statement, the Board has no knowledge of any
business which will be presented for consideration at the Annual Meeting other
than the election of directors. Should any other matters be properly presented,
it is intended that the enclosed proxy will be voted in accordance with the best
judgment of the persons voting the matter.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP has been selected to serve as independent
accountants of the Company for the fiscal year ending December 31, 1999, and
also served as the independent accountants of the Company for the fiscal years
ended December 31, 1997 and 1998. Representatives of such firm are expected to
be present at the Annual Meeting. They will have the opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
STOCKHOLDER'S PROPOSALS
Proposals of stockholders to be presented at the Annual Meeting of
Stockholders to be held in 2000 must be received at the office of the Secretary
of the Company no later than December 15, 1999 in order to be included in the
applicable proxy statement and form of proxy relating to that meeting.
By Order of the Board of Directors
Michael A. Gerlich
Secretary
Houston, Texas
April 27, 1999
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SHERIDAN ENERGY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
B.A. Berilgen, Michael A. Gerlich or any of them, with power of substitution of
each, and hereby authorized to represent the undersigned at the Annual meeting
of Stockholders of Sheridan Energy, Inc. to be held at the Doubletree Hotel at
Allen Center, 400 Dallas Street, Houston, Texas, on May 25, 1999, at 9:00 a.m.,
and any adjournment or adjournments thereof, and to vote the number of shares
which the undersigned would be entitled to vote if personally present.
To vote in accordance with the Board of Directors' recommendations just
sign the reverse side; no boxes need be checked.
(Continued and to be signed on reverse side) SEE
REVERSE SIDE
<PAGE>
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<CAPTION>
Please Detach and Mail in the Envelope Provided
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A [X] Please mark your
votes as in this
example.
FOR WITHHOLD
1. Election of [ ] [ ] Nominees: Mr. B.A. Berilgen 2. In their discretion, upon such other matters
Directors Mr. Jonathan P. Carroll as properly come before the meeting.
Mr. W. Craig Childers
Instructions: To withhold authority to Mr. D. Bradley Dunn When properly executed, this proxy will be voted as
vote for an individual nominee, write Mr. Michael A. Gerlich designated hereon by the undersigned. If no choice is
that nominee's name on the line provided Mr. David H. Scheiber specified, the proxy will be voted "FOR" the elections
below. Mr. Jeffrey E. Susskind of all nominees for Director listed hereon, and "FOR"
proposal 2 as set forth hereon and, according to the
- ----------------------------------------- discretion of the proxy holders, on any other matters
that may properly come before the Meeting or any other
postponements or adjournments thereof.
PLEASE DO NOT FOLD OR MUTILATE THIS CARD
Please mark, sign, date and return this proxy card
promptly using the enclosed envelope.
SIGNATURE_________________________________ DATE____________, 1999 SIGNATURE___________________________________ DATE_________,1999
NOTE: Please sign exactly as name appears on this card. On joint accounts, each joint holder should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give your full title as such. If a corporation, please sign in partnership
name by authorized person.
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