<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934*
Edge Petroleum Corporation
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(Name of Issuer)
Common Stock, par value $.01 per share
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(Title of Class of Securities)
279862 10 6
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(CUSIP Number)
John E. Calaway
Edge Petroleum Corporation
1111 Bagby, Suite 2100
Houston, Texas 77002
(713) 654-8960
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
March 3, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page should be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP NO. 279862 10 6
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
JOHN E. CALAWAY
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
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SEC USE ONLY
3
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SOURCE OF FUNDS
4
00
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEMS 2(d) OR 2(e)
[ ]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
UNITED STATES OF AMERICA
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SOLE VOTING POWER 133,646 SHARES
7
NUMBER OF
SHARES -----------------------------------------------------------
SHARED VOTING POWER 481,541 SHARES
BENEFICIALLY 8
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER 133,646 SHARES
9
REPORTING
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER 364,938 SHARES
WITH 10
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
615,187 SHARES
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[ ]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
8.7%
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TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN
14
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CUSIP NO. 279862 10 6
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CALAWAY OIL AND GAS CORPORATION
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
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SEC USE ONLY
3
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SOURCE OF FUNDS
4
00
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEMS 2(d) OR 2(e)
[ ]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
TEXAS
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SOLE VOTING POWER -0-
7
NUMBER OF
SHARES -----------------------------------------------------------
SHARED VOTING POWER 481,541 SHARES
BENEFICIALLY 8
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER -0-
9
REPORTING
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER 364,938 SHARES
WITH 10
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
481,541 SHARES
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[ ]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
6.5%
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TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) CO
14
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CUSIP NO. 279862 10 6
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CALAWAY PARTNERS
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
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SEC USE ONLY
3
- -------------------------------------------------------------------------------
SOURCE OF FUNDS
4
00
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEMS 2(d) OR 2(e)
[ ]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
TEXAS
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SOLE VOTING POWER -0-
7
NUMBER OF
SHARES -----------------------------------------------------------
SHARED VOTING POWER -0-
BENEFICIALLY 8
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER -0-
9
REPORTING
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER -0-
WITH 10
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
-0-
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[ ]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
-0-
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TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) PN
14
-4-
<PAGE>
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CUSIP NO. 279862 10 6
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
NELL G. CALAWAY
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [X]
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SEC USE ONLY
3
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SOURCE OF FUNDS
4
00
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
5 ITEMS 2(d) OR 2(e)
[ ]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
UNITED STATES OF AMERICA
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SOLE VOTING POWER -0-
7
NUMBER OF
SHARES -----------------------------------------------------------
SHARED VOTING POWER -0-
BENEFICIALLY 8
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER 116,603 SHARES
9
REPORTING
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER -0-
WITH 10
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
116,603 SHARES
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[ ]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
1.6%
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TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN
14
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<PAGE>
ITEM 1. SECURITY AND ISSUER
The class of securities to which this statement relates is common stock,
par value $.01 per share (the "Common Stock"), of Edge Petroleum Corporation, a
Delaware corporation (the "Company"). The address of the principal executive
offices of the Company is Texaco Heritage Plaza, 1111 Bagby, Suite 2100,
Houston, Texas 77002.
ITEM 2. IDENTITY AND BACKGROUND
This statement is filed by John E. Calaway ("Mr. Calaway"), Nell G. Calaway
("Ms. Calaway"), Calaway Oil and Gas Corporation, a Texas corporation that is
wholly owned by Mr. Calaway ("COGC"), and Calaway Partners, a Texas general
partnership that is 50% owned by COGC and 50% owned by Ms. Calaway ("CP" and
collectively with Mr. Calaway, Ms. Calaway and COGC, the "Calaway Parties").
Mr. Calaway is a citizen of the United States of America, and his principal
occupation and employment is acting as Chairman of the Board and Chief Executive
Officer of the Company. The principal business of the Company is the
exploration for oil and natural gas, and the address of the Company's principal
executive offices is as set forth in Item 1, Security and Issuer. Ms. Calaway
is a citizen of the United States of America, and her principal occupation and
employment is acting as a fitness instructor. Ms. Calaway is the ex-wife of Mr.
Calaway. The principal business of COGC is holding its general partner interest
in CP and its shares of Common Stock. Mr. Calaway is the sole director and the
sole executive officer of COGC. The principal business of CP is holding its
shares of Common Stock. Pursuant to the Partnership Agreement of CP dated June
29, 1994 (the "CP Partnership Agreement"), a copy of which has been filed as
Exhibit A hereto and is incorporated herein by reference, actions by CP require
the agreement of a majority in interest of its partners, subject to certain
exceptions
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specified in the Partnership Agreement and in Item 6, Contracts, Arrangements,
Understandings or Relationships with Respect to Securities of the Issuer. The
business address of Mr. Calaway and the address of the principal business of
each of COGC and CP is Texaco Heritage Plaza, 1111 Bagby, Suite 2100, Houston,
Texas 77002. The residence address of Ms. Calaway is 2152 Watts Road, Houston,
Texas 77030. During the last five years, none of the Calaway Parties has been
convicted in any criminal proceeding (excluding traffic violations or similar
misdemeanors) or has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
See Item 4, Purpose of Transaction, and Item 6, Contracts, Arrangements,
Understandings or Relationships with Respect to Securities of the Issuer.
ITEM 4. PURPOSE OF TRANSACTION
On March 3, 1997, the Company issued 364,938 shares of Common Stock to COGC
and 116,603 shares of Common Stock to CP pursuant to an Amended and Restated
Combination Agreement dated as of January 13, 1997 (the "Combination
Agreement"), among the Company, Edge Petroleum Corporation, a Texas corporation
("Old Edge"), Edge Group II Limited Partnership, a Connecticut limited
partnership ("Edge Group II"), Gulfedge Limited Partnership, a Texas limited
partnership ("Gulfedge"), Edge Mergeco, Inc., a Texas corporation ("Mergeco"),
and Edge Group Partnership, a Connecticut general partnership ("Edge Group"), a
copy of which has been filed as Exhibit B hereto and is incorporated herein by
reference, and
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as contemplated by the Company's Registration Statement on Form S-4
(Registration Statement No. 333-17269), as amended (the "Form S-4 Registration
Statement"). Such shares were issued in a merger of Old Edge with Mergeco, a
wholly owned subsidiary of the Company organized solely to effect the merger, in
respect of 16,359.14 shares and 5,227 shares of common stock of Old Edge held by
COGC and CP, respectively. On that date, the Company also issued 133,646
restricted shares of Common Stock and granted options for 133,646 shares of
Common Stock to Mr. Calaway pursuant to the Employment Agreement dated March 3,
1997 (the "Employment Agreement") between the Company and Mr. Calaway and the
Company's Incentive Plan, copies of which have been filed as Exhibit C and
Exhibit D hereto, respectively, and are incorporated herein by reference.
66,823 of such restricted shares of Common Stock vest ratably over five years,
beginning on the first anniversary of the date of grant, and 66,823 of such
restricted shares of Common Stock vest on the earlier to occur of 10 years from
the date of grant or the achievement of certain performance goals. Such options
are exercisable in cumulative annual increments of one-fifth of the total number
of shares of Common Stock subject thereto, beginning on the first anniversary of
the date of grant, at a purchase price of $16.50 per share and expire ten years
from the date of their issuance.
The Calaway Parties will review on a continuous basis their investment in
the Common Stock and the Company's business affairs and financial condition, as
well as conditions in the securities markets and general economic and industry
conditions. The Calaway Parties may in the future take such actions in respect
of their investment in the Common Stock as they deem appropriate in light of the
circumstances existing from time to time. Currently, these actions include
continuing to hold the shares they now beneficially own or disposing of shares.
Such
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<PAGE>
dispositions could be effected in private transactions, through a public
offering or, upon compliance with the rules under the Securities Act of 1933, as
amended (the "Securities Act"), in the open market. Additionally, it is
possible that the Calaway Parties could seek to acquire additional shares,
although they have no current plans to do so, other than through employee
benefit plans or arrangements with the Company. Any acquisition of shares could
be effected in the open market, in privately negotiated transactions, or
otherwise. Shares may be transferred from time to time among the Calaway
Parties and to other entities or trusts controlled by them and to family
members. Any sales, purchases or transfers or other actions described herein
may be made at any time without further prior notice. In reaching any
conclusion as to the foregoing matters, the Calaway Parties may take into
consideration various factors, such as the Company's business and prospects,
other developments concerning the Company, the obligations of, cash and
financial resources and needs of, investment goals of and other business
opportunities available to the Calaway Parties, developments with respect to the
Calaway Parties' businesses, general economic conditions, the market price for
shares of Common Stock and stock market conditions.
Dispositions of the 481,541 shares of Common Stock received by the Calaway
Parties pursuant to the Combination Agreement are restricted (subject to certain
limitations) by the Company's Bylaws, a copy of which has been filed as Exhibit
F hereto and is incorporated herein by reference, until August 25, 1997 without
the prior written consent of the underwriters for the IPO and the Company.
Additionally, in a Lock-up Agreement dated February 25, 1997 of Mr. Calaway (the
"Lock-up Agreement"), a copy of which has been filed as Exhibit E hereto and is
incorporated herein by reference, delivered pursuant to the Underwriting
Agreement of the Company dated February 25, 1997, Mr. Calaway agreed not to sell
(subject to certain limitations)
-9-
<PAGE>
any shares of Common Stock until August 25, 1997 (180 days after February 25,
1997 (the date of the Prospectus of the Company (the "Prospectus") relating to
the initial public offering of shares of Common Stock (the "IPO") as described
in the Company's Registration Statements on Form S-1 (Registration Nos. 333-
17269 and 333-22363), as amended (collectively, the "Form S-1 Registration
Statement)) without the prior written consent of the underwriters for the IPO.
Except as set forth in Item 6, Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer, the Calaway Parties have
no present plans or proposals which relate to or would result in any of the
actions described in subparagraphs (a) through (h) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
As of March 3, 1997, Mr. Calaway beneficially owned an aggregate of 615,187
shares of Common Stock (approximately 8.7% of the 7,351,932 shares outstanding,
determined by reference to the approximately 7,351,932 shares of Common Stock
the Company reported in the Prospectus would be outstanding following the
consummation of the Combination Agreement, assuming no exercise of the
underwriters' overallotment option).
Except as set forth in this Schedule 13D, to the best of each of the
Calaway Parties' knowledge, none of the Calaway Parties have effected any
transaction in Common Stock during the past sixty days.
Mr. Calaway owns all of the outstanding capital stock of COGC. Mr. Calaway
has the sole power to vote and dispose of the Common Stock held by COGC and
therefore may be deemed to be the beneficial owner of such Common Stock.
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<PAGE>
Pursuant to the CP Partnership Agreement, COGC exercises sole voting power
with respect to the Common Stock held by CP, and Ms. Calaway exercises the sole
power to dispose or direct the disposition of such Common Stock (except as
described in Item 6, Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer). Each of Ms. Calaway, COGC and Mr.
Calaway (through COGC) may therefore be deemed to be the beneficial owner of the
shares held by CP. As a result of the foregoing, a group consisting of the
Calaway Parties may be deemed to exist pursuant to Rule 13d-5(b)(1) promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Such group would be deemed to have beneficial ownership, for purposes of
Sections 13(g) and 13(d) of the Exchange Act, of all equity securities of the
Company beneficially owned by such parties. Such parties would, as of March 3,
1997 be deemed to beneficially own an aggregate of 615,187 shares of Common
Stock or approximately 8.7% of the foregoing total number of shares reported to
be outstanding (based in part on information provided by the Company). Mr.
Calaway and COGC disclaim beneficial ownership of the shares of Common Stock
held by CP, and Ms. Calaway disclaims beneficial ownership of the shares of
Common Stock held by CP, COGC and Mr. Calaway, and nothing herein shall be
deemed an admission that a group exists.
Mr. Calaway has the power to vote the 133,646 restricted shares of Common
Stock issued to him pursuant to the Employment Agreement and the Company's
Incentive Plan, but will only have the power to dispose of such shares as they
vest as described in Item 6, Contracts, Arrangements, Understandings or
Relationships with Respect to Securities of the Issuer.
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<PAGE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Except as described in this statement or in the documents referred to
herein, there are no contracts, arrangements, understandings or relationships
(legal or otherwise) among the persons named in Item 2 of this statement or
between such persons and any person with respect to any securities of the
Company.
The Company was formed in August 1996 as a subsidiary of Old Edge. Prior
to consummation of the Combination Agreement, Old Edge conducted its operations
through Edge Joint Venture II, a Texas general partnership (the "Joint
Venture"). Interests in the Joint Venture were held by Old Edge, Edge Group II,
Gulfedge and Edge Group. On March 3, 1997, pursuant to the Combination
Agreement and as contemplated by the Form S-4 Registration Statement, the
Company acquired, directly or indirectly, all of the interests in the Joint
Venture through its completion of (i) a merger of Old Edge with Mergeco, a
wholly owned subsidiary of the Company organized solely to effect the merger, in
which the shareholders of Old Edge (including the Calaway Parties) received
Common Stock, (ii) an exchange offer to the general and limited partners of Edge
Group II in which such partners exchanged their interests in Edge Group II for
Common Stock, (iii) an exchange offer to the limited partners of Gulfedge in
which such limited partners exchanged their interests in Gulfedge for Common
Stock and (iv) a purchase from Edge Group of its interests in the Joint Venture
for consideration consisting of Common Stock. The closing of the transactions
under Combination Agreement occurred simultaneously with the closing of the sale
of 2,400,000 shares of Common Stock pursuant to the Company's IPO as described
in the Form S-1 Registration Statement.
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<PAGE>
The current directors of the Company are John E. Calaway, James D. Calaway,
Vincent Andrews, David B. Benedict, Nils P. Peterson, Stanley S. Raphael, John
Sfondrini and Robert W. Shower. Prior to the consummation of the Combination
Agreement, the Company's sole stockholder at such time (Old Edge, of which Mr.
Calaway was at such time and currently is the Chairman of the Board and Chief
Executive Officer) appointed each of such directors to the Board of Directors of
the Company (except for Mr. Shower, who was appointed by the Board of Directors
of the Company).
Pursuant to the CP Partnership Agreement, COGC exercises sole voting power
with respect to the Common Stock held by CP, and Ms. Calaway exercises the sole
power to dispose or direct the disposition of such Common Stock, except that the
CP Partnership Agreement provides that Ms. Calaway will not sell any shares of
Common Stock without first offering to sell such shares to COGC on the same
terms and conditions as any bona fide third party offer.
Pursuant to the Employment Agreement and the Company's Incentive Plan, on
March 3, 1997, the Company issued 133,646 restricted shares of Common Stock and
granted options for 133,646 shares of Common Stock to Mr. Calaway. 66,823 of
such restricted shares of Common Stock vest ratably over five years, beginning
on the first anniversary of the date of grant, and 66,823 of such restricted
shares of Common Stock vest on the earlier to occur of 10 years from the date of
grant or the achievement of certain performance goals. Such options are
exercisable in cumulative annual increments of one-fifth of the total number of
shares of Common Stock subject thereto, beginning on the first anniversary of
the date of grant, at a purchase price of $16.50 per share and expire ten years
from the date of their issuance. Mr. Calaway will be
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<PAGE>
deemed to be the beneficial owner of such shares 60 days prior to the
exercisability of the options related to such shares.
The Company's Bylaws restrict the disposition of the 481,541 shares of
Common Stock received by the Calaway Parties pursuant to the Combination
Agreement (subject to certain limitations) until August 25, 1997 without the
prior written consent of the underwriters for the Company's IPO and the Company.
The Lock-up Agreement restricts the disposition by Mr. Calaway of shares of
Common Stock until August 25, 1997 (subject to certain limitations) without the
prior written consent of the underwriters for the Company's IPO.
Pursuant to a Promissory Note dated January 24, 1995 by Mr. Calaway and
COGC to Mr. James C. Calaway and a Pledge and Security Agreement dated December
13, 1994 by Mr. Calaway and COGC to Mr. James C. Calaway (collectively, the
"Loan Documents"), copies of which have been filed as Exhibit G hereto and are
incorporated herein by reference, Mr. Calaway pledged 46,965 shares of Common
Stock to Mr. James C. Calaway to secure borrowings of $300,000 by Mr. Calaway
thereunder.
The foregoing are summaries of certain provisions of the Partnership
Agreement, the Combination Agreement, the Employment Agreement, the Company's
Incentive Plan, the Lock-up Agreement, the Company's Bylaws and the Loan
Documents, copies of which have been filed as Exhibits A, B, C, D, E, F and G,
respectively, hereto and are incorporated by reference herein; and such
summaries are qualified by, and subject to, the more complete information
contained in such agreements.
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<PAGE>
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit A. Partnership Agreement dated June 29, 1994 by and among COGC
and Mr. Calaway and Assignment of Partnership Interest
dated June 29, 1994 by and among Mr. Calaway, Ms. Calaway
and COGC.
Exhibit B. Amended and Restated Combination Agreement dated as of
January 13, 1997 among the Company, Old Edge, Edge Group
II, Gulfedge, Mergeco and Edge Group (Incorporated by
reference to Exhibit 2.1 to the Company's Registration
Statement on Form S-4 (Registration No. 333-17269)).
Exhibit C. Employment Agreement dated March 3, 1997 between the
Company and Mr. Calaway.
Exhibit D. Incentive Plan of the Company (Incorporated by reference to
Exhibit 10.9 to the Company's Registration statement on
Form S-4 (Registration No. 333-17269)).
Exhibit E. Lock-up Agreement dated February 25, 1997 of Mr. Calaway.
Exhibit F. Bylaws of the Company (Incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-4
(Registration No. 333-17269)).
Exhibit G. Promissory Note dated January 24, 1995 by Mr. Calaway and
COGC to Mr. James C. Calaway and Pledge and Security
Agreement dated December 13, 1994 by Mr. Calaway and COGC
to Mr. James C. Calaway.
Exhibit H. Joint Filing Agreement dated March 13, 1997 among the
Calaway Parties.
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<PAGE>
After reasonable inquiry and to the best of their knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Date: March 13, 1997.
/s/ John E. Calaway
-------------------------
John E. Calaway
CALAWAY OIL AND GAS CORPORATION
By:/s/ John E. Calaway
----------------------
John E. Calaway
President and Secretary
CALAWAY PARTNERS, by CALAWAY OIL AND
GAS CORPORATION, its general partner
By:/s/ John E. Calaway
----------------------
John E. Calaway
President and Secretary
/s/ Nell G. Calaway
-------------------------
Nell G. Calaway
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<PAGE>
EXHIBIT A
===============================================================================
PARTNERSHIP AGREEMENT
BY AND AMONG
CALAWAY OIL AND GAS, INC.
AND
JOHN E. CALAWAY
EFFECTIVE JUNE 29, 1994
===============================================================================
<PAGE>
TABLE OF CONTENTS
Article I
Formation of Partnership
Section 1.1 Formation of Partnership.................................... 1
Section 1.2 Name of Partnership......................................... 1
Section 1.3 Purpose of the Partnership.................................. 1
Section 1.4 Term........................................................ 1
Section 1.5 Statutory Compliance........................................ 1
Section 1.6 Title to Property........................................... 2
Section 1.7 Payments of Individual Obligations.......................... 2
Section 1.8 Independent Activities; Transactions With Affiliates........ 2
Section 1.9 Place of Business........................................... 2
Article II
Definitions
Section 2.1 "Act"....................................................... 2
Section 2.2 "Adjusted Capital Account Deficit".......................... 3
Section 2.3 "Agreement"................................................. 3
Section 2.4 "Bankruptcy"................................................ 3
Section 2.5 "Calaway"................................................... 3
Section 2.6 "Calaway Assets"............................................ 3
Section 2.7 "Capital Account"........................................... 3
Section 2.8 "Capital Contribution"...................................... 4
Section 2.9 "Code" or "Internal Revenue Code"........................... 4
Section 2.10 "Company"................................................... 4
Section 2.11 "Depreciation".............................................. 4
Section 2.12 "Edge Stock"................................................ 5
Section 2.13 "Fiscal Year"............................................... 5
Section 2.14 "Gross Asset Value"......................................... 5
Section 2.15 "Involuntary Bankruptcy".................................... 6
Section 2.16 "Partner" or "Partners"..................................... 6
Section 2.17 "Partnership"............................................... 6
Section 2.18 "Net Cash Flow"............................................. 6
Section 2.19 "Person".................................................... 6
Section 2.20 "Profits" or "Losses"....................................... 6
Section 2.21 "Regulations"............................................... 7
Section 2.22 "Sharing Ratio"............................................. 7
Section 2.23 "Transfer".................................................. 7
Section 2.24 "Voluntary Bankruptcy"...................................... 7
Section 2.25 "Wholly Owned Affiliate".................................... 7
(i)
<PAGE>
Article II
Capital Contributions
Section 3.1 Initial Capital Contributions............................... 8
Section 3.2 Additional Capital Contributions............................ 8
Section 3.3 Return on Contributions..................................... 8
Section 3.4 Additional Partners......................................... 8
Article IV
Allocations
Section 4.1 Profits and Losses.......................................... 8
Section 4.2 Special Allocations......................................... 9
Section 4.3 Curative Allocations........................................ 9
Section 4.4 Tax Allocations: Code Section 704(c)........................ 10
Article V
Distributions
Section 5.1 Net Cash Flow............................................... 10
Section 5.2 Amounts Withheld............................................ 10
Article VI
Management
Section 6.1 General Authority of Partners............................... 11
Section 6.2 Specific Authority of Partners.............................. 11
Section 6.3 Compensation and Expenses................................... 11
Article VII
Indemnification of Partners
Section 7.1 General..................................................... 11
Section 7.2 Unauthorized Acts........................................... 12
Section 7.3 Limitations................................................. 12
Article VIII
Accounting, Books and Records
Section 8.1 Accounting, Books and Records............................... 12
Section 8.2 Tax Returns; Information.................................... 12
Section 8.3 Tax Elections............................................... 12
Section 8.4 Tax Matters Person.......................................... 12
(ii)
<PAGE>
Article IX
Amendments and Meetings
Section 9.1 Amendments.................................................. 13
Section 9.2 Meetings of the Partners.................................... 13
Section 9.3 Unanimous Consent in Lieu of Meeting........................ 13
Article X
Transfers
Section 10.1 Restrictions on Transfers................................... 14
Section 10.2 Permitted Transfers......................................... 14
Section 10.3 Right of First Refusal...................................... 16
Section 10.4 Distribution Among Partners................................. 17
Article XI
Withdrawals; Action for Partition; Breaches
Section 11.1 Waiver of Partition......................................... 18
Section 11.2 Covenant Not to Withdraw or Dissolve........................ 18
Section 11.3 Consequences of Violation of Covenants...................... 18
Section 11.4 Breach Payments............................................. 19
Section 11.5 No Bonding.................................................. 20
Article XII
Dissolution and Winding Up
Section 12.1 Liquidating Events.......................................... 20
Section 12.2 Winding Up.................................................. 21
Section 12.3 Deemed Distribution and Recontribution...................... 21
Section 12.4 Rights of Partners.......................................... 21
Article XIII
Miscellaneous
Section 13.1 Binding Arbitration......................................... 22
Section 13.2 Notices..................................................... 22
Section 13.3 Binding Effect.............................................. 22
Section 13.4 Headings.................................................... 22
Section 13.5 Severability................................................ 23
Section 13.6 Further Action.............................................. 23
Section 13.7 Variation of Pronouns....................................... 23
Section 13.8 Governing Law............................................... 23
Section 13.9 Counterpart Execution....................................... 23
Section 13.10 Specific Performance........................................ 24
(iii)
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Section 13.11 Set-off..................................................... 24
Section 13.12 Loans....................................................... 24
(iv)
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PARTNERSHIP AGREEMENT
FOR
CALAWAY PARTNERS
This Partnership Agreement (this "Agreement") is made and entered into
by and between Calaway Oil & Gas Corporation, a Texas corporation ("Company"),
and John E. Calaway, a resident of Harris County, Texas ("Calaway"). Calaway and
the Company are sometimes referred to herein collectively as the "Partners" and
individually as a "Partner".
ARTICLE I
FORMATION OF PARTNERSHIP
SECTION 1.1 FORMATION OF PARTNERSHIP. The Company and Calaway hereby
form, pursuant to the provisions of the Act, a partnership (the "Partnership")
for the purposes and scope hereinafter set forth. Except as provided to the
contrary in this Agreement, the rights, duties, status, and liabilities of the
Partners, and the formation, administration, dissolution, and continuation or
termination of the Partnership, shall be as provided in the Act.
SECTION 1.2 NAME OF PARTNERSHIP. The name of the Partnership shall be
"Calaway Partners" and all business of the Partnership shall be conducted in
such name. The Partnership shall hold all of its property in the name of the
Partnership and not in the name of any Partner.
SECTION 1.3 PURPOSE OF THE PARTNERSHIP.
(a) Subject to the terms of this Agreement, the purpose of the
Partnership is to acquire, own, mortgage, encumber, hypothecate, lease,
sell, maintain, improve, alter, remodel, expand, manage and otherwise
operate and deal with the property being contributed to the Partnership
and any property subsequently acquired by the Partnership.
(b) The Partnership shall be a partnership only for the purpose
specified in this Section 1.3. Except as otherwise provided in this
Agreement, the Partnership shall not engage in any other activity or
business and no Partner shall have any authority to hold himself out as
a general agent of another Partner in any other business or activity.
SECTION 1.4 TERM. The term of the Partnership shall commence on the date
hereof and shall continue until the winding up and liquidation of the
Partnership and its business is completed following a "Liquidating Event," as
provided in Article XII hereof.
SECTION 1.5 STATUTORY COMPLIANCE. The Partnership shall exist under and
be governed by, and this Agreement shall be construed in accordance with, the
applicable laws of the State of Texas. The Partners shall make all filings and
disclosures required by, and shall otherwise comply with, all such laws. The
Partners shall execute and file in the appropriate records any assumed or
fictitious name certificates and other documents and
<PAGE>
instruments as may be necessary or appropriate with respect to the formation of,
and conduct of business by, the Partnership.
SECTION 1.6 TITLE TO PROPERTY. All real and personal property owned by
the Partnership shall be owned by the Partnership as an entity and no Partner
shall have any ownership interest in such property in its individual name or
right, and each Partners's interest in the Partnership shall be personal
property for all purposes.
SECTION 1.7 PAYMENTS OF INDIVIDUAL OBLIGATIONS. The Partnership's credit
and assets shall be used solely for the benefit of the Partnership, and no asset
of the Partnership shall be transferred or encumbered for or in payment of any
individual obligation of a Partner.
SECTION 1.8 INDEPENDENT ACTIVITIES; TRANSACTIONS WITH AFFILIATES.
(a) The Company and any of its affiliates shall be required to
devote only such time to the affairs of the Partnership as the Company
determines in its sole discretion may be necessary to manage and operate
the Partnership, and each such Person shall be free to serve any other
Person or enterprise in any capacity that it may deem appropriate in its
discretion. Calaway shall not be required to devote any time to the
affairs of the Partnership.
(b) Insofar as permitted by applicable law, each Partner (acting
on his own behalf) and its affiliates may, notwithstanding this
Agreement, engage in whatever activities they choose, whether the same
are competitive with the Partnership or otherwise, without having or
incurring any obligation to offer any interest in such activities to the
Partnership or any Partner and neither this Agreement nor any activity
undertaken pursuant hereto shall prevent any Partner or his affiliates
from engaging in such activities, or require any Partner to permit the
Partnership or any Partner or his affiliates to participate in any such
activities, and as a material part of the consideration for the
execution of this Agreement by each Partner, each Partner hereby waives,
relinquishes, and renounces any such right or claim of participation.
SECTION 1.9 PLACE OF BUSINESS. The principal office of the Partnership
shall be the office of Calaway, which is now 1111 Bagby, Suite 2100, Houston,
Texas 77002.
ARTICLE II
DEFINITIONS
As used in this Agreement, the following terms shall have the respective
meanings indicated.
SECTION 2.1 "ACT" means the Texas Revised Partnership Act, Article
6132b-1.01, et seq., of the Texas Revised Civil Statutes Annotated, as amended
from time to time.
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SECTION 2.2 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to
any Partner, the deficit balance, if any, in such Partner's Capital Account as
of the end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(a) Credit to such Capital Account any amounts which such
Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-
1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted and applied consistently therewith.
SECTION 2.3 "AGREEMENT" means this Partnership Agreement of Calaway
Partners.
SECTION 2.4 "BANKRUPTCY" means, with respect to any Person, a Voluntary
Bankruptcy or an Involuntary Bankruptcy.
SECTION 2.5 "CALAWAY" means John E. Calaway and his heirs, legal
representatives and permitted assigns.
SECTION 2.6 "CALAWAY ASSETS" means those assets being contributed to the
Partnership by Calaway in accordance with Section 3.1(b) hereof and any assets
purchased with the proceeds from any Transfer of the Calaway Assets.
SECTION 2.7 "CAPITAL ACCOUNT" means, with respect to any Partner, the
Capital Account maintained for such Person in accordance with following
provisions:
(a) To each Person's Capital Account there shall be credited
such Person's Capital Contributions, such Person's distributive share of
Profits and any items in the nature of income or gain which are
specially allocated pursuant to Section 4.2 or Section 4.3 hereof, and
the amount of any Partnership liabilities which are assumed by such
Person or which are secured by any assets of the Partnership distributed
to such Person.
(b) To each Person's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any assets of the
Partnership distributed to such Person pursuant to any provision of this
Agreement, such Person's distributive share of Losses and any items in
the nature of expenses or losses which are specially allocated pursuant
to Section 4.2 or Section 4.3 hereof, and the amount of any liabilities
of such Person which are assumed by the Partnership or which are secured
by any property contributed by such Person to the Partnership.
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(c) In the event all or a portion of an interest in the
Partnership is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred interest.
(d) In determining the amount of any liability for purposes of
Sections 2.7(a) and 2.7(b) hereof, there shall be taken into account
Code Section 752(c) and any other applicable provisions of the Code and
Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Section 1.704-1(b) of the Regulations, and shall be interpreted and applied in a
manner consistent with such Regulations. In the event the Partners shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities which are secured by contributed or distributed
property or which are assumed by the Partnership or the Partners), are computed
in order to comply with such Regulations, the Partners may make such
modification, provided that it is not likely to have a material effect on the
amounts distributable to any Person pursuant to Article XII hereof upon the
dissolution of the Partnership. The Partners also shall (i) make any adjustments
that are necessary or appropriate to maintain equality between the Capital
Accounts of the Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance with
Section 1.704-1(b)(2)(iv)(q) of the Regulations, and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Section 1.704-1(b) of the Regulations.
SECTION 2.8 "CAPITAL CONTRIBUTION" means, with respect to any Partner,
the amount of money and the initial Gross Asset Value of any property (other
than money) contributed to the Partnership with respect to the interest in the
Partnership held by such Partner pursuant to the terms of this Agreement.
SECTION 2.9 "CODE" or "INTERNAL REVENUE CODE" means the Internal Revenue
Code of 1986, as amended from time to time.
SECTION 2.10 "COMPANY" means Calaway Oil & Gas Corporation and its
successors and permitted assigns.
SECTION 2.11 "DEPRECIATION" means, for each Fiscal Year or other period,
an amount equal to the depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year or other period;
provided, however, that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or
other period, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis; provided, further that if the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year is zero, Depreciation shall be
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determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Partners.
SECTION 2.12 "EDGE STOCK" means 8,172 shares of the common stock, $.01
par value per share, of Edge Petroleum Corporation, which stock is being
contributed to the Partnership by the Company in accordance with Section 3.1(a)
hereof, and any assets purchased with the proceeds from any Transfer of the Edge
Stock.
SECTION 2.13 "FISCAL YEAR" means (i) the period commencing on the
effective date of this Agreement and ending on December 31, 1994, (ii) any
subsequent twelve (12) month period commencing on January 1 and ending on
December 31, or (iii) any portion of the period described in clause (ii) for
which the Partnership is required to allocate Profits, Losses and other items of
Partnership income, gain, less or deduction pursuant to Article IV hereof.
SECTION 2.14 "GROSS ASSET VALUE" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the Partnership;
(b) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as
determined by the Partners, as of the following times: (a) the
acquisition of an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Partnership to a Partner of
more than a de minimis amount of Partnership assets as consideration for
an interest in the Partnership; and (c) the liquidation of the
Partnership within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations; provided, however, that adjustments pursuant to clauses (a)
and (b) above shall be made only if the Partners reasonably determines
that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the Partnership;
(c) The Gross Asset Value of any Partnership asset distributed
to any Partner shall be the gross fair market value of such asset on the
date of distribution; and
(d) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Section 1.704-
1(b)(2)(iv)(m) of the Regulations and Section 4.2(c) hereof; provided,
however, that Gross Asset Values shall not be adjusted pursuant to this
Section 2.14 to the extent the Partners determines that an adjustment
pursuant to Section 2.14(b) hereof is necessary or appropriate in
connection with a transaction that would otherwise result in an
adjustment pursuant to this Section 2.14(d).
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If the Gross Asset Value of an asset has been determined or adjusted pursuant to
Section 2.14(a), 2.14(b), or 2.14(d) hereof, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Profit and Losses.
SECTION 2.15 "INVOLUNTARY BANKRUPTCY" means, with respect to any Person,
without the consent or acquiescence of such Person, the entering of an order for
relief or approving a petition for relief or reorganization or any other
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution, or other similar relief under any present or future
bankruptcy, insolvency, or similar statute, law, or regulation, or the filing of
any such petition against such Person, which petition shall not be dismissed
within 90 days, or, without the consent or acquiescence of such Person, the
entering of an order appointing a trustee, custodian, receiver, or liquidator of
such Person or of all or any substantial part of the property of such Person,
which order shall not be dismissed within 60 days.
SECTION 2.16 "PARTNER" OR "PARTNERS" means Calaway and the Company,
together with each other Person (if any) that subsequently becomes an additional
or substituted Partner in accordance with this Agreement, but excluding any such
Person that subsequently ceases to be a Partner pursuant to the provisions of
this Agreement. "Partners" means all such Persons. All references in this
Agreement to a majority or a specified percentage in interest of the Partners
shall mean Partners holding Sharing Ratios more than 50% or such specified
percentage, respectively, of the Sharing Ratios then held by all of the
Partners.
SECTION 2.17 "PARTNERSHIP" has the meaning attributed to it in
Section 1.1.
SECTION 2.18 "NET CASH FLOW" means the gross cash proceeds of the
Partnership less the portion thereof used to pay or establish reserves for all
Partnership expenses, debt payments, capital improvements, replacements, and
contingencies, all as determined by the Partners. Net Cash Flow shall not be
reduced by depreciation, amortization, cost recovery deductions, or similar
allowances, but shall be increased by any reductions of reserves previously
established.
SECTION 2.19 "PERSON" means an individual, partnership, corporation,
trust, unincorporated association, or other entity or association.
SECTION 2.20 "PROFITS" OR "LOSSES" means, for each Fiscal Year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this Section 2.20 shall be added to such taxable income or loss;
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(b) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations
and not otherwise taken into account in computing Profits or Losses
pursuant to this Section 2.20 shall be subtracted from such taxable
income or loss;
(c) In the event the Gross Asset Value of any Partnership asset
is adjusted pursuant to Section 2.14(b) or Section 2.14(d) hereof, the
amount of such adjustment shall be taken into account as gain or loss
from the disposition of such asset for purposes of computing Profits or
Losses; and
(d) Gain or loss resulting from any disposition of Partnership
assets with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding that the adjusted tax
basis of such property differs from its Gross Asset Value.
SECTION 2.21 "REGULATIONS" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
SECTION 2.22 "SHARING RATIO" means, at all times, the ratio that such
Partner's interest in the Partnership bears to the interest in the Partnership
of all Partners. Calaway and the Company shall each have an initial Sharing
Ratio of 50%.
SECTION 2.23 "TRANSFER" means, as a noun, any voluntary or involuntary
transfer, sale, pledge, hypothecation, or other disposition and, as a verb,
voluntarily or involuntarily to transfer, sell, pledge, hypothecate, or
otherwise dispose of.
SECTION 2.24 "VOLUNTARY BANKRUPTCY" means, with respect to any Person,
the inability of such Person generally to pay its debts as such debts become
due, or an admission in writing by such Person of its inability to pay its debts
generally or a general assignment by such Person for the benefit of creditors;
the filing of any petition or answer by such Person seeking to adjudicate it a
bankrupt or insolvent, or seeking for itself any liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
such Person or its debts under any law relating to bankruptcy, insolvency, or
reorganization or relief of debtors, or seeking, consenting to, or acquiescing
in the entry of an order for relief or the appointment of a receiver, trustee,
custodian, or other similar official for such Person or for any substantial
part of its property; or corporate action taken by such Person to authorize any
of the actions set forth above.
SECTION 2.25 "WHOLLY OWNED AFFILIATE" of any Person shall mean (i) any
partnership, corporation, trust, or other entity or association at least 90% of
the voting interests or beneficial ownership of which is owned, directly or
indirectly, by such Person, or (ii) any Person who, directly or indirectly, owns
at least 90% of the voting stock or beneficial ownership of such Person.
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ARTICLE III
CAPITAL CONTRIBUTIONS
SECTION 3.1 INITIAL CAPITAL CONTRIBUTIONS.
(a) COMPANY. The Company shall contribute to the capital of the
Partnership the Edge Stock, free and clear of any lien, claim, security
interest, charge, pledge, encumbrance, call, commitment, option,
conversion right or privilege of any character whatsoever. SEE APPENDIX
B FOR RETENTION OF VOTING RIGHTS AND RIGHT OF FIRST REFUSAL.
(b) CALAWAY. Calaway shall contribute to the capital of the
Partnership the building and land, subject to the liens and
encumbrances, identified on Appendix A attached hereto.
SECTION 3.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Without the unanimous
consent of the Partners, no Partner shall be required to contribute additional
cash or capital to the Partnership or pay to the Partnership or any other
Partner any deficit or negative balance that may exist from time to time in such
Partner's Capital Account; provided, however, that the Company shall be required
to contribute any cash or capital required by the Partnership to fund any taxes
or other expenses associated with the Calaway Assets.
SECTION 3.3 RETURN OF CONTRIBUTIONS. Except as may expressly be provided
herein, no Partner shall be entitled to the return of its Capital Contribution
or any other contribution to the Partnership nor entitled to be paid any
interest, salary or drawing in respect of either its Capital Account or an
Capital Contribution made by it to the Partnership. No unrepaid Capital
Contribution shall be deemed or considered to be a liability of the Partnership
or of any Partner. Except as expressly provided herein, no Partner shall be
required to contribute or loan any cash or property to the Partnership to enable
the Partnership to return any Partner's contributions to the Partnership or to
balance Capital Accounts.
SECTION 3.4 ADDITIONAL PARTNERS. No additional Partners shall be
admitted to the Partnership without the unanimous consent of the Partners.
ARTICLE IV
ALLOCATIONS
SECTION 4.1 PROFITS AND LOSSES. After giving effect, to the special
allocations set forth in Sections 4.2 and 4.3 hereof, Profits or Losses for any
Fiscal Year shall be allocated among the Partners as follows:
(a) if attributable to the Edge Stock, 99% to Calaway and 1% to
the Company;
(b) if attributable to the Calaway Assets, 99% to the Company
and 1% to Calaway; and
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(c) all other Profits or Losses shall be allocated among the
Partners in proportion to their Sharing Ratios.
SECTION 4.2 SPECIAL ALLOCATIONS. The following special allocations shall
be made in the following order:
(a) QUALIFIED INCOME OFFSET. In the event any Partner
unexpectedly receives any adjustments, allocations, or distributions
described in Section 1.704-1(b)(2)(ii)(d)(4), Section 1.704-
1(b)(2)(ii)(d)(5), or Section 1.704-1(b)(2)(ii)(d)(6) of the
Regulations, items of Partnership income and gain shall be specially
allocated to each such Partner in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of such Partner as quickly as possible, provided
that an allocation pursuant to this Section 4.2(a) shall be made only if
and to the extent that such Partner has an Adjusted Capital Account
Deficit after all other allocations provided for in this Article IV have
been tentatively made as if this Section 4.2(a) were not in this
Agreement.
(b) GROSS INCOME ALLOCATION. In the event any Partner has a
deficit Capital Account at the end of any Partnership Fiscal Year which
is in excess of the sum of (i) the amount such Partner is obligated to
restore pursuant to any provision of this Agreement and (ii) the amount
such Partner is deemed to be obligated to restore pursuant to the
penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Regulations, each such Partner shall be specially allocated items of
Partnership income and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this Section 4.2(b)
shall be made only if and to the extent that such Partner has a deficit
Capital Account in excess of such sum after all other allocations
provided for in this Article IV have been tentatively made as if Section
4.2(a) hereof and this Section 4.2(b) were not in this Agreement.
(c) SECTION 754 ADJUSTMENTS. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Section 1.704-
1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations,
to be taken into account in determining Capital Accounts, the amount of
such adjustment to Capital Accounts shall be treated as an item of gain
(if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Partners in accordance with their interest in
the Partnership in the event Section 1.704-1(b)(2)(iv)(m)(2) of the
Regulations applies, or to the Partner to whom such distribution was
made in the event Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations
applies.
SECTION 4.3 CURATIVE ALLOCATIONS. The allocations set forth in Section
4.2 hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Partners that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Partnership
income, gain, loss, or deduction pursuant to this
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Section 4.3 Therefore, notwithstanding any other provision of this Article IV
(other than the Regulatory Allocations), the Partners shall make such offsetting
special allocations of Partnership income, gain, loss, or deduction in whatever
manner it determines appropriate so that, after such offsetting allocations are
made, each Partner's Capital Account balance is, to the extent possible, equal
to the Capital Account balance such Partner would have had if the Regulatory
Allocations were not part of this Agreement and all Partnership items were
allocated pursuant to Section 4.1 hereof.
SECTION 4.4 TAX ALLOCATIONS: CODE SECTION 704(C). In accordance with
Code Section 704(c) and the Regulations thereunder, income, gain, loss, and
deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value (computed in accordance with Section 2.14(a) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted
pursuant to Section 2.14(b) hereof, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Regulations thereunder.
Any elections or other decisions relating to such allocations shall be
made by the Partners in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Section 4.4 are solely
for purposes of federal, state, and local taxes and shall not affect, or in any
way be taken into account in computing, any Person's Capital Account or share of
Profits, Losses, other items, or distributions pursuant to any provision of this
Agreement.
ARTICLE V
DISTRIBUTIONS
SECTION 5.1 NET CASH FLOW. Except as otherwise provided in Article XII
hereof, Net Cash Flow shall be distributed as follows:
(a) if attributable to the Edge Stock, 100% to Calaway;
(b) if attributable to the Calaway Assets, 100% to the Company;
and
(c) all other Net Cash Flow shall be allocated among the
Partners in proportion to their Sharing Ratios.
SECTION 5.2 AMOUNTS WITHHELD. All amounts withheld pursuant to the Code
or any provision of any state or local tax law with respect to any payment,
distribution, or allocation to the Partnership or the Partners shall be treated
as amounts distributed to the Partners pursuant to this Article V for all
purposes under this Agreement. The Partners are authorized to withhold from
distributions, and to pay over to any federal, state, or local government, any
amounts required to be so withheld pursuant to the Code or any provisions
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of any other federal, state, or local law, and may allocate any such amounts
among the Partners in any manner that is in accordance with applicable law.
ARTICLE VI
MANAGEMENT
SECTION 6.1 GENERAL AUTHORITY OF PARTNERS. Subject to any provision in
this Agreement to the contrary, any actions by the Partnership shall require the
agreement of a majority in interest of the Partners. Thus, if the Partnership
has only two Partners (each having a 50% Sharing Ratio), actions by the
Partnership shall require the unanimous agreement of the Partners. If the
Partners are unable to agree on the proper course of action for the Partnership
to take with respect to any matter, the matter shall be submitted to arbitration
in accordance with Section 13.1 hereof.
SECTION 6.2 SPECIFIC AUTHORITY OF PARTNERS. Notwithstanding the
provisions of Section 6.1:
(a) Calaway shall have the authority to cause a disposition of
the Edge Stock without the consent or agreement of the Company and the
Company shall have the authority to cause a disposition of the Calaway
Assets without the consent or agreement of Calaway. Prior to either
Partner causing a Transfer of the Edge Stock or the Calaway Assets in
accordance with the foregoing sentence, the Partner who has authority to
cause a disposition of such asset shall first offer to sell the Edge
Stock or Calaway Asset, as the case may be, to the other Partners
upon terms no less favorable than those being contemplated or negotiated
with a third party. Any subsequent disposition of the Edge Stock or the
Calaway Asset, as the case may be, to a third party shall be on terms
substantially similar to those offered to the other Partners.
(b) The Company shall have the exclusive authority to cause the
Partnership to vote the Edge Stock in any manner that the Company shall
determine.
SECTION 6.3 COMPENSATION AND EXPENSES. No Partner shall receive any
salary, fee, or draw for services rendered to or on behalf of the Partnership,
nor shall any Partner be reimbursed for any expenses incurred by such Partner on
behalf of the Partnership.
ARTICLE VII
INDEMNIFICATION OF PARTNERS
SECTION 7.1 GENERAL. The Partnership shall indemnify, save harmless, and
pay all judgments and claims against each Partner or any officers or directors
of such Partner relating to any liability or damage incurred by reason of any
act performed or omitted to be performed by such Partner, officer or director in
connection with the business of the Partnership, including attorneys' fees
incurred by such Partner, officer or director in connection with the defense of
any action based on any such act or omission, which
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attorneys' fees may be paid as incurred, including all such liabilities under
federal and state securities laws (including the Securities Act of 1933, as
amended) as permitted by law.
SECTION 7.2 UNAUTHORIZED ACTS. If any Partner purports to do any act on
behalf of the Partnership or to bind the Partnership, in violation of the
Provisions of this Agreement or takes any actions which are outside the
authority of such Partner as established under this Agreement, then such Partner
shall, at his or its cost and expense, indemnify and hold harmless the other
Partners and the Partnership from all claims, causes of action, costs, expenses,
obligations and liabilities thereby arising, and, without limiting the
generality of the foregoing, shall cause the release and discharge of all
mechanic's and materialmen's liens or other liens, arising as a result of such
unauthorized acts and which shall have cast a cloud on the title of the
Partnership to any property.
SECTION 7.3 LIMITATIONS. Notwithstanding anything to the contrary in any
of Sections 7.1 and 7.2 above, no Partner shall be indemnified from any
liability for fraud, bad faith, willful misconduct, or gross negligence.
ARTICLE VIII
ACCOUNTING, BOOKS AND RECORDS
SECTION 8.1 ACCOUNTING, BOOKS AND RECORDS. The Partnership shall
maintain at its principal place of business separate books of account for the
Partnership which shall show a true and accurate record of all costs and
expenses incurred, all charges made, all credits made and received, and all
income derived in connection with the operation of the Partnership business in
accordance with generally accepted accounting principles consistently applied
and, to the extent inconsistent therewith, in accordance with this Agreement.
The Partnership shall use the cash or accrual method of accounting, as the
Partners shall determine, in preparation of its annual reports and for tax
purposes and shall keep its books accordingly. Each Partner shall, at his sole
expense, have the right, at any time without notice to any other Partner, to
examine, copy, and audit the Partnership's books and records during the normal
business hours.
SECTION 8.2 TAX RETURNS; INFORMATION. The Partners shall cause the
Partnership's accountants to prepare all income and other tax returns of the
Partnership and shall cause the same to be filed in an timely manner. Each
Partner shall be provided with a copy of each such return, together with any
schedules or other information which may be required in connection with such
Partners' own tax affairs.
SECTION 8.3 TAX ELECTIONS. In connection with any Permitted Transfer
(as such term is defined in Article X) of an interest in the Partnership, the
Partners shall cause the Partnership, at the written request of the transferor
or the transferee, to make an election to adjust the basis of the Partnership's
property in the manner provided in Code Sections 734(b) and 743(b) and Section
1.754-1(b) of the Regulations.
SECTION 8.4 TAX MATTERS PERSON. The Company is specially authorized to
act as the "Tax Matters Person" under the Code and in any similar capacity under
state or local law.
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ARTICLE IX
AMENDMENTS AND MEETINGS
SECTION 9.1 AMENDMENTS.
(a) Amendments to this Agreement may be proposed by any Partner
submitting to the other Partners a verbatim statement of any proposed
amendment. The proposing Partner shall seek the written vote of the
Partners on the proposed amendment or shall call a meeting to vote
thereon and to transact any other business that it may deem appropriate.
For purposes of obtaining a written vote, the proposing Partner may
require response within a reasonable specified time, but not less than
15 business days, and failure to respond in such time period shall
constitute a vote in favor of the proposed amendment. A proposed
amendment shall be adopted and be effective as an amendment hereto if it
receives the affirmative vote of a majority in interest of the Partners.
(b) Notwithstanding Section 9.1(a) hereof, this Agreement shall
not be amended without the consent of each Person adversely affected if
such amendment would alter the interest of a Partner in Profits, Losses,
other items, or any Partnership distributions.
SECTION 9.2 MEETINGS OF THE PARTNERS.
(a) Meetings of the Partners may be called by any Partner.
Notice of any such meeting shall be given to all Partners not less than
7 business days nor more than 30 business days prior to the date of such
meeting and shall state the nature of any business to be transacted
thereof. Partners may vote in person or by proxy at such meeting.
Whenever the vote or consent of Partners is permitted or required under
this Agreement, such vote or consent may be given at a meeting of
Partners or may be given in accordance with the procedure prescribed in
Section 9.3 hereof. Except as otherwise expressly provided in this
Agreement, the vote of a majority in interest of the Partners shall
control.
(b) Each Partner may authorize any Person or Persons to act for
it by proxy on all matters in which a Partner is entitled to
participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Partner or
its attorney-in-fact. No proxy shall be valid after the expiration of 11
months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Partner executing
it.
(c) Each meeting of the Partners shall be conducted by the
Partner who called the meeting.
SECTION 9.3 UNANIMOUS CONSENT IN LIEU OF MEETING. The Partnership may
take any action contemplated under this Agreement if approved by the unanimous
consent of the Partners acting without a meeting, such consent to be provided in
writing, or by telephone or facsimile, if such telephone conversation or
facsimile is followed by a hard copy of the
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telephone conversation or facsimilied communication sent by registered or
certified mail, postage and charges prepaid, addressed as described in Section
13.2, or to such other address as such Person may from time to time specify by
notice to the Partners.
ARTICLE X
TRANSFERS
SECTION 10.1 RESTRICTIONS ON TRANSFERS. Except as expressly permitted or
required by this Agreement, no Partner shall Transfer all or any portion of his
interest in the Partnership or any rights therein without the unanimous consent
of the Partners. Any Transfer or attempted Transfer by any Partner in violation
of the preceding sentence shall be null and void and of no force or effect
whatever. Each Partner hereby acknowledges the reasonableness of the
restrictions on Transfer imposed by this Agreement in view of the Partnership
purposes and the relationship of the Partners. Accordingly, the restrictions on
Transfer contained herein shall be specifically enforceable. Each Partner hereby
further agrees to hold the Partnership and each Partner (and each Partner's
successors and assigns) wholly and completely harmless from any cost, liability,
or damage (including, without limitation, liabilities for income taxes and costs
of enforcing this indemnity) incurred by any of such indemnified Persons as a
result of a Transfer or an attempted Transfer in violation of this Agreement.
SECTION 10.2 PERMITTED TRANSFERS.
(a) GENERAL. Subject to the conditions and restrictions set
forth in this Section 10.2, a Partner shall have the right to Transfer
all or any portion of his interest in the Partnership by means of a
Permitted Transfer.
(b) DEFINITION OF PERMITTED TRANSFER; PERMITTED TRANSFEREES.
(i) A "Permitted Transfer" is any Transfer by a Partner of
all or any portion of his interest in the Partnership to a
Permitted Transferee, provided that such Transfer otherwise
complies with the conditions and restrictions of this Section
10.2.
(ii) A "Permitted Transferee" of a Partner is any Person
who is (1) a Wholly Owned Affiliate of such Partner, (2) a
member of such Partner's Family, (3) any other Partner, (4) a
Personal Representative of such Partner, (5) any Purchaser in
accordance with Section 10.3 hereof, or (6) any Person approved
as a Permitted Transferee by the unanimous consent of the
Partners.
(iii) A Partner's "Family" includes only any Person who, at
the time of the Permitted Transfer, is such Partner's spouse
(which in the case of Calaway shall specifically include Nell
Calaway, notwithstanding any pending divorce proceeding),
natural or adoptive lineal ancestors or descendants, and trusts
for his or their exclusive benefit.
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(iv) A Partner's "Personal Representative" includes only any
Person who succeeds to such Partner's estate as a result of such
Partner's death, legal incompetence, or Bankruptcy and any transferee
of such Partner's interest from any such Person.
(C) CONDITIONS TO PERMITTED TRANSFERS. A Transfer otherwise permitted
under this Section 10.2 shall not be a Permitted Transfer and any attempted
Transfer of a Partner's interest to a Permitted Transferee shall be null
and void and of no force or effect whatever unless and until the following
conditions are satisfied or waived by the other Partners:
(i) Except in the case of a Permitted Transfer to a Partner's
Personal Representative, the transferor and transferee shall execute
such documents and instruments of conveyance and assumption as may be
necessary or appropriate in the opinion of counsel to the Partnership
to effect such Transfer and to confirm the Permitted Transferee's
agreement to be bound by the provisions of this Article X and
assumption of all monetary obligations of the transferor Partner with
respect to the interest being transferred and the transferor Partner's
agreement to guarantee the prompt payment and performance of such
assumed obligations.
(ii) In the case of a Permitted Transfer to a Partner's Personal
Representative, the Permitted Transferee shall deliver such assurances
as may be necessary or appropriate in the opinion of counsel to the
Partnership to confirm such Transfer and that such transferor Partner
(and/or his estate) remains liable to perform all monetary obligations
with respect to such interest.
(iii) Except in the case of a Permitted Transfer to a Partner's
Personal Representative, the Partnership shall receive, prior to such
Transfer, an opinion of counsel satisfactory to the Partnership
confirming that such Transfer will not terminate the Partnership for
federal income tax purposes.
(iv) The transferor and transferee shall furnish the Partnership
with the transferee's taxpayer identification number, sufficient
information to determine the transferee's initial tax basis in the
interest transferred, and any other information reasonably necessary
to permit the Partnership to file all required federal and state tax
returns and other legally required information statements or returns.
Without limiting the generality of the foregoing, the Partnership
shall not be required to make any distribution otherwise provided for
in this Agreement with respect to any transferred interest until it
has received such information.
(v) A Partner making a Permitted Transfer of all or a portion of
his Partnership interest and the Permitted Transferee thereof shall
pay all reasonable costs and expenses incurred by the Partnership in
connection with such Transfer.
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(d) ADMISSION OF PERMITTED TRANSFEREE AS A PARTNER. A Permitted
Transferee (other than a Partner's Personal Representative) of an interest
in the Partnership will be admitted as a Partner in the Partnership. A
Permitted Transferee who is a Partner's Personal Representative shall be
admitted as a Partner in the Partnership only upon the unanimous consent of
the Partners. The rights of a Permitted Transferee who is not admitted as a
Partner shall be limited to the right to receive allocations and
distributions from the Partnership with respect to the interest
transferred, as provided by this Agreement. The transferor of such interest
shall not be a partner with respect to such interest, and, without limiting
the foregoing, shall not have the right to inspect the Partnership's books,
act for or bind the Partnership, or otherwise interfere in its operations.
(e) EFFECT OF PERMITTED TRANSFER ON PARTNERSHIP. The Partners intend
that the Permitted Transfer of an interest in the Partnership shall not
cause the dissolution of the Partnership under the Act; however,
notwithstanding any such dissolution, the Partners shall continue to hold
the Partnership's assets and operate its business in Partnership form under
this Agreement as if no such dissolution had occurred.
SECTION 10.3 RIGHT OF FIRST REFUSAL. Except as permitted by Section 10.2
hereof, no Partner shall Transfer all or any portion of its interest in the
Partnership (the "Offered Interest") unless such Partner (the "Seller") first
offers to sell the Offered Interest pursuant to the terms of this Section 10.3.
(a) LIMITATION ON TRANSFERS. No Transfer may be made under this
Section 10.3 unless the Seller has received a bona fide written offer (the
"Purchase Offer") from a Person (the "Purchaser") to purchase the Offered
Interest for a purchase price (the "Offer Price") denominated and payable
in United States dollars at closing or according to specified terms, with
or without interest, which offer shall be in writing signed by the
Purchaser and shall be irrevocable for a period ending no sooner than the
business day following the end of the Offer Period, as hereinafter defined.
(b) OFFER NOTICE. Prior to making any Transfer that is subject to the
terms of this Section 10.3, the Seller shall give to each other Partner
written notice (the "Offer Notice") which shall include a copy of the
Purchase Offer and an offer (the "First Offer") to sell the Offered
Interest to the other Partners (the "Offerees") for the Offer Price,
payable according to the same terms as (or more favorable terms than) those
contained in the Purchase Offer, provided that the First Offer shall be
made without regard to the requirement of any earnest money or similar
deposit required of the Purchaser prior to closing, and without regard to
any security (other than the Offered Interest) to be provided by the
Purchaser for any deferred portion of the Offer Price.
(c) OFFER PERIOD. The First Offer shall be irrevocable for a period
(the "Offer Period") ending at 11:59 p.m. (local time at the Partnership's
principal office) on the 30th day following the day of the Offer Notice.
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(d) ACCEPTANCE OF FIRST OFFER. Any Offeree may accept the First Offer
as to that portion of the Offered Interest that corresponds to the ratio of
its Sharing Ratio to the total Sharing Ratio held by all Offerees by giving
written notice of such acceptance to the Seller on or before the expiration
of the Offer Period. In the event that the Offerees ("Accepting Offerees"),
in the aggregate, accept the First Offer with respect to all of the Offered
Interest, the First Offer shall be deemed to be accepted. If the Offerees
do not accept the First Offer as to all of the Offered Interest during the
Offer Period, the First Offer shall be deemed to be rejected in its
entirety.
(e) CLOSING OF PURCHASE PURSUANT TO FIRST OFFER. In the event that the
First Offer is accepted, the closing of the sale of the Offered Interest
shall take place within 30 days after the First Offer is accepted or, if
later, the date of closing set forth in the Purchase Offer. The Seller and
all Accepting Offerees shall execute such documents and instruments as may
be necessary or appropriate to effect the sale of the Offered Interest
pursuant to the terms of the First Offer and this Article X.
(f) SALE PURSUANT TO PURCHASE OFFER IF FIRST OFFER REJECTED. If the
First Offer is not accepted in the manner provided hereinabove, the Seller
may sell the Offered Interest to the Purchaser at any time within 60 days
after the last day of the Offer Period, provided that such sale shall be
made on terms no more favorable to the Purchaser than the terms contained
in the Purchase Offer and provided further that such sale complies with
conditions of Section 10.2(c) hereof. In the event that the Offered
Interest is not sold in accordance with the terms of the preceding
sentence, the Offered Interest shall again become subject to all of the
conditions and restrictions of this Section 10.3.
SECTION 10.4 DISTRIBUTION AMONG PARTNERS. If a Permitted Transfer of an
interest in the Partnership occurs during any Fiscal Year, Profits, Losses, each
item thereof, and all other items attributable to such interest for such Fiscal
Year shall be divided and allocated between the transferor and the transferee by
taking into account their varying interests during the Fiscal Year in accordance
with Code Section 706(d), using any conventions permitted by law and selected by
the Partners. All distributions on or before the date of a Permitted Transfer
shall be made to the transferor, and all distributions thereafter shall be made
to the transferee. Solely for purposes of making such allocations and
distributions, the Partnership shall recognize a Permitted Transfer not later
than the end of the calendar month during which it is given notice stating the
date such interest was transferred and such other information as the Partners
may reasonably require. If a Transfer is not a Permitted Transfer then all of
such items shall be allocated, and all distributions shall be made, to the
Person who, according to the books and records of the Partnership, on the last
day of the Fiscal Year during which the Transfer occurs, was the owner of the
Partnership interest. The Partners and the Partnership shall incur no liability
for making allocations and distributions in accordance with the provisions of
this Section 10.4, whether or not the Partners or the Partnership have knowledge
of any Transfer of ownership of any interest in the Partnership.
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ARTICLE XI
WITHDRAWALS; ACTION FOR PARTITION; BREACHES
SECTION 11.1 WAIVER OF PARTITION. No Partner shall, either directly or
indirectly, take any action to require partition, file a bill for Partnership
accounting or appraisement of the Partnership or of any of its assets or
properties or cause the sale of any Partnership property, and notwithstanding
any provisions of applicable law to the contrary, each Partner (and each of his
legal representatives, successors, or assigns) hereby irrevocably waives any and
all rights it may have to maintain any action for partition or to compel any
sale with respect to his Partnership interest, or with respect to any assets or
properties of the Partnership, except as expressly provided in this Agreement.
SECTION 11.2 COVENANT NOT TO WITHDRAW OR DISSOLVE. Notwithstanding any
provision of the Act, each Partner hereby covenants and agrees that the Partners
have entered into this Agreement based on their mutual expectation that all
Partners will continue as Partners and carry out the duties and obligations
undertaken by them hereunder and that, except as otherwise expressly required or
permitted hereby, each Partner hereby covenants and agrees not to (a) take any
action to file a certificate of dissolution or its equivalent with respect to
itself, (b) take any action that would cause a Voluntary Bankruptcy of such
Partner, (c) withdraw or attempt to withdraw from the Partnership, (d) exercise
any power under the Act to dissolve the Partnership, (e) transfer all or any
portion of his interest in the Partnership, (f) petition for judicial
dissolution of the Partnership, or (g) demand a return of such Partner's
contributions or profits (or a bond or other security for the return of such
contributions or profits) without the unanimous consent of the Partners.
SECTION 11.3 CONSEQUENCES OF VIOLATION OF COVENANTS. Notwithstanding
anything to the contrary in the Act, if a Partner (a "Breaching Partner")
attempts to (i) cause a partition in breach of Section 11.1 hereof or (ii)
withdraw from the Partnership or dissolve the Partnership to take any action in
breach of Section 11.2 hereof, the Partnership shall continue and such Breaching
Partner shall be subject to this Section 11.3. In such event, the following
shall occur:
(a) The Breaching Partner shall immediately cease to be a Partner and
shall have no further power to act for or bind the Partnership;
(b) The other Partners shall continue to have the right to possess the
Partnership's property and goodwill and to conduct its business and
affairs;
(c) The Breaching Partner shall be liable in damages, without
requirement of a prior accounting, to the Partnership for all costs and
liabilities that the Partnership or any Partner may incur as a result of
such breach;
(d) The Partnership shall have no obligation to pay to the Breaching
Partner his contributions, capital, or profits, but may, by notice to the
Breaching Partner within 30 days of his withdrawal, elect to make Breach
Payments (as
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hereinafter defined) to the Breaching Partner in complete satisfaction of
the Breaching Partner's interest in the Partnership;
(e) If the Partnership does not elect to make Breach Payments pursuant
to Section 11.3(d) hereof, the Partnership shall treat the Breaching
Partner as if he were an unadmitted assignee of the interest of the
Breaching Partner and shall make distributions to the Breaching Partner
only of those amounts otherwise payable with respect to such interest
hereunder;
(f) The Partnership may apply any distributions otherwise payable with
respect to such interest (including Breach Payments) to satisfy any claims
it may have against the Breaching Partner;
(g) The Breaching Partner shall have no right to inspect the
Partnership's books or records or obtain other information concerning the
Partnership's operations;
(h) The Breaching Partner shall continue to be liable to the
Partnership for any unpaid Capital Contributions required hereunder with
respect to such interest and to be jointly and severally liable with the
other Partners for any debts and liabilities (whether actual or contingent,
known or unknown) of the Partnership existing at the time the Breaching
Partner withdraws or dissolves; and
(i) Notwithstanding anything to the contrary hereinabove provided,
unless the Partnership has elected to make Breach Payments to the Breaching
Partner in satisfaction of his interest, the Partnership may offer and sell
(on any terms that are not manifestly unreasonable) the interest of the
Breaching Partner to any other Partners or other Persons on the Breaching
Partner's behalf, provided that any Person acquiring such interest becomes
a Partner with respect to such interest and agrees to perform the duties
and obligations imposed by this Agreement on the Breaching Partner.
SECTION 11.4 BREACH PAYMENTS.
(a) For purposes hereof, "Breach Payments" shall mean payments made in
four annual installments, each equal to one-fourth of the Breach Amount,
payable on the next four (4) consecutive anniversaries of the breach by the
Breaching Partner, with simple interest accrued from the date of such
breach through the date each such installment is paid on the unpaid balance
of such Breach Amount at the prime rate then in effect as Texas Commerce
Bank or its successor. The "Breach Amount" shall be an amount equal to the
greater of $1 or the Net Equity of the Breaching Partner's interest on the
day of such breach, computed in accordance with Section 11.4(b) hereof. The
Partnership may, at its sole election, prepay all or any portion of the
Breach Payments or interest accrued thereon at any time without penalty.
(b) NET EQUITY. The "Net Equity" of a Partner's interest in the
Partnership, as of any day, shall be the amount that would be distributed
to such Partner in
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liquidation of the Partnership pursuant to Section 12.2 hereof if (1) all
of the Partnership's assets were sold for their Gross Asset Values, (2) the
Partnership paid its accrued, but unpaid, liabilities and established
reserves for the payment of reasonably anticipated contingent or unknown
liabilities, and (3) the Partnership distributed the remaining proceeds to
the Partners in liquidation, all as of such day.
The Net Equity of a Partner's interest in the Partnership shall be
determined, without audit or certification, from the books and records of
the Partnership by the firm of independent certified public accountants
regularly employed by the Partnership. The Net Equity of a Partner's
interest shall be determined within 30 days of the day upon which such
accountants are apprised in writing of the Gross Asset Value of the
Partnership's assets, and the amount of such Net Equity shall be disclosed
to the Partnership and each of the Partners by written notice. The Net
Equity determination of such accountants shall be final and binding in the
absence of a showing of gross negligence or willful misconduct.
SECTION 11.5 NO BONDING. Notwithstanding anything to the contrary in the
Act, the Partnership shall not be obligated to secure the value of the Breaching
Partner's interest by bond or otherwise; provided, however, that if a court of
competent jurisdiction determines that, in order to continue the business of the
Partnership such value must be so secured, the Partnership may provide such
security. If the Partnership provides such security, the Breaching Partner shall
not have any right to participate in Partnership profits or distributions during
the term of the Partnership, or to receive any interest on the value of such
interest. For this purpose, the value of the interest of the Breaching Partner
shall be the greater of $1 or the Net Equity of such interest as of the
effective date of the Breaching Partner's withdrawal.
ARTICLE XII
DISSOLUTION AND WINDING UP
SECTION 12.1 LIQUIDATING EVENTS. The Partnership shall dissolve and
commence winding up and liquidating upon the first to occur of any of the
following ("Liquidating Events"):
(a) December 31, 2000;
(b) The unanimous vote of the Partners to dissolve, wind up, and
liquidate the Partnership;
(c) The happening of any other event that makes it unlawful or
impossible to carry on the business of the Partnership; or
(d) Any event which causes there to be only one Partner.
The Partners hereby agree that, notwithstanding any provision of the Act, the
Partnership shall not dissolve prior to the occurrence of a Liquidating Event.
If it is determined, by a court of competent jurisdiction, that the Partnership
has dissolved prior to the occurrence
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of a Liquidating Event, the Partners hereby agree to continue the business of
the Partnership without a winding up or liquidation.
SECTION 12.2 WINDING UP. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purpose of winding up its affairs in
an orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners and no Partner shall take any action that is inconsistent
with, or not necessary to or appropriate for, winding up the Partnership's
business and affairs. To the extent not inconsistent with the foregoing, all
covenants and obligations in this Agreement shall continue in full force and
effect until such time as the Partnership assets have been distributed pursuant
to this Section 12.2 and the Partnership has terminated. The Partners shall be
responsible for overseeing the winding up and liquidation of the Partnership,
shall take full account of the Partnership's assets and liabilities, shall cause
the Partnership assets to be liquidated as promptly as is consistent with
obtaining the fair market value thereof, and shall cause the proceeds therefrom,
to the extent sufficient therefor, to be applied and distributed in the
following order:
(a) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors (including any of the Partners);
(b) The balance, if any, to the Partners in accordance with their
Capital Accounts, after giving effect to all contributions, distributions,
and allocations for all periods.
The Partners shall not receive any additional compensation for any services
performed pursuant to this Article XII. Each Partner understands and agrees that
by accepting the provisions of this Section 12.2 setting forth the priority of
the distribution of the assets of the Partnership to be made upon its
liquidation, such Partner expressly waives any right which it, as a creditor of
the Partnership, might otherwise have under the Act to receive distributions of
assets pari passu with the other creditors of the Partnership in connection with
a distribution of assets of the Partnership in satisfaction of any liability of
the Partnership, and hereby subordinates to said creditors any such right.
SECTION 12.3 DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding any
other provisions of this Article XII, in the event the Partnership is liquidated
within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations but no
Liquidating Event has occurred, the Partnership assets shall not be liquidated,
the Partnership's liabilities shall not be paid or discharged, and the
Partnership's affairs shall not be wound up. Instead, the Partnership shall be
deemed to have distributed the Partnership assets in kind to the Partners, who
shall be deemed to have assumed and taken such property subject to all
Partnership liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter, the Partners shall be deemed to have
recontributed the Partnership assets in kind to the Partnership, which shall be
deemed to have assumed and taken such property subject to all such liabilities.
SECTION 12.4 RIGHTS OF PARTNERS. Except as otherwise provided in this
Agreement, (a) each Partner shall look solely to the assets of the Partnership
for the return of his
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Capital Contributions and shall have no right or power to demand or receive
property other than cash from the Partnership and (b) no Partner shall have
priority over any other Partner as to the return of his Capital Contributions,
or any distribution, or allocations.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 BINDING ARBITRATION. Upon the request of any party (whether
made before or after the institution of any legal proceeding), any action,
dispute, claim, or controversy of any kind (including, but not limited to,
actions in contract or in tort, statutory or common law, legal or equitable) now
existing or hereafter arising between any of the parties hereto in any way
arising out of, pertaining to or in connection with this Agreement shall be
resolved by binding arbitration. All arbitration proceedings between the parties
shall be conducted in Houston, Texas and shall be administered by the American
Arbitration Association, in accordance with the Commercial Arbitration Rules of
the American Arbitration Association and, to the maximum extent applicable, the
Federal Arbitration Act (Title 9 of the United States Code). The decision
rendered in the arbitration proceeding shall be final and conclusive upon the
parties and may be enforced by any court of competent jurisdiction.
SECTION 13.2 NOTICES. Any and all notices, requests, consents or other
communications permitted or required to be given under the terms of this
Agreement shall be in writing and shall be deemed received (a) if given by
telecopier, when transmitted and the appropriate telephonic confirmation
received if transmitted on a business day and during normal business hours of
the recipient, and otherwise on the next business day following transmission,
(b) if given by certified mail, return receipt requested, postage prepaid, three
business days after being deposited in the United States mails, and (c) if given
by Federal Express service or other means, when received or personally
delivered. The mailing address and facsimile number of each of the parties is as
follows or at such other addresses as may be provided to the other parties by
notice given in accordance with the foregoing:
(a) If to the Partnership or the Company, to the address set forth in
Section 1.9 or facsimile number (713) 654-7722; and
(b) If to Calaway, 1111 Bagby, Suite 2100, Houston, Texas 77002.
Any Person may from time to time specify a different address or facsimile
number by notice given in the manner provided in this Section 13.2.
SECTION 13.3 BINDING EFFECT. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall be
binding upon and inure to the benefit of the Partners and their respective
heirs, legal representatives, successors, transferees, and assigns.
SECTION 13.4 HEADINGS. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define, or limit the scope, extent, or intent of this Agreement or
any provision hereof.
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SECTION 13.5 SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable; and this Agreement
shall be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom. Furthermore,
in lieu of such illegal, invalid, or unenforceable provisions there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable and that shall not be more restrictive than the
one severed herefrom.
SECTION 13.6 FURTHER ACTION. Each Partner, upon the request of the
Partners, agrees to perform all further acts and execute, acknowledge, and
deliver any documents which may be reasonably necessary, appropriate, or
desirable to carry out the provisions of this Agreement.
SECTION 13.7 VARIATION OF PRONOUNS. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, or neuter, singular or
plural, as the identity of the Person or Persons may require.
SECTION 13.8 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Texas (regardless of the laws that might otherwise govern under
applicable Texas principles of conflicts of law) and the parties agree to bring
any legal proceeding arising out of or under this Agreement only in one of the
courts specified herein. All actions or proceedings with respect to this
Agreement or any other instrument or document executed in connection herewith or
as security herefor may be instituted in either the courts of Harris County,
Texas or the United States District Court for the Southern District of the State
of Texas, and by execution and delivery of this Agreement, the parties hereto
each unconditionally submit to the jurisdiction (both subject matter and
personal) of each such court, and irrevocably and unconditionally waive (i) any
objection they may now or hereafter have to the laying of venue in any such
courts, and (ii) any claim that any action or proceeding brought in any of such
courts has been brought in an inconvenient forum. In addition to all other
agents of service, each Partner hereby appoints the Secretary of State of the
State of Texas as their agent for service of process for any suit brought in any
court of proper jurisdiction in the State of Texas under or by reason of this
Agreement, provided that the foregoing shall be in addition to and not in
limitation of any other means of service of process in the State of Texas or
hereunder. Service of the foregoing may be made by registered letter with a copy
of the Petition or Complaint attached thereto addressed to the Secretary of
State for forwarding to the parties in the manner provided in Section 13.2
hereof. The parties hereto further agree that the mailing to their last known
address by certified or registered mail of any process shall constitute lawful
and valid process and service thereof.
SECTION 13.9 COUNTERPART EXECUTION. This Agreement may be executed in any
number of counterparts with the same effect as if all of the Partners had signed
the same document. All counterparts shall be construed together and shall
constitute one and the same agreement.
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<PAGE>
SECTION 13.10 SPECIFIC PERFORMANCE. Each Partner agrees with the other
Partners that the other Partners will be irreparably damaged if any of the
provisions of this Agreement are not performed in accordance with their specific
terms and that monetary damages will not provide an adequate remedy in such
event. Accordingly, it is agreed that in addition to any other remedy to which
the nonbreaching Partners may be entitled, at law or in equity, the nonbreaching
Partners shall be entitled to injunctive relief to prevent breaches of the
provisions of this Agreement and specifically to enforce the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having subject matter jurisdiction thereof.
SECTION 13.11 SET-OFF. In the event that any sum is payable to any Partner
pursuant to this Agreement, any amounts owed by such Partner to the Partnership
shall be deducted from said sum before payment to such Partner.
SECTION 13.12 LOANS. Any Partner may, with the approval of the Partners,
lend or advance money to the Partnership. If any Partner shall make any loan or
loans to the Partnership or advance money on its behalf, the amount of any such
loan or advance shall not be treated as a contribution to the capital of the
Partnership but shall be a debt due from the Partnership. The amount of any such
loan or advance by a lending Partner shall be repayable out of the Partnership's
cash and shall bear interest at the rate agreed between the Partnership and the
lending Partner. None of the Partners shall be obligated to make any loan or
advance to the Partnership.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date
indicated below each Partner's signature.
COMPANY:
Calaway Oil & Gas Corporation
By: /s/ John E. Calaway
--------------------------------
John E. Calaway, President
Dated: 6/29/94
CALAWAY:
/s/ John E. Calaway
-----------------------------------
John E. Calaway
Dated: 6/29/94
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<PAGE>
APPENDIX A
TO PARTNERSHIP AGREEMENT
BY AND AMONG
CALAWAY OIL AND GAS CORPORATION
AND
JOHN E. CALAWAY
Calaway shall contribute to the capital of the Partnership the real property
located at 2409 Commerce, Houston, Harris County, Texas, more particularly
described as follows: Being TRS 2, 3 & 4, block forty-one (41), ABST 87 SM
Williams Survey Harris County, Texas, Tax Appraisal Number 037-142-000-0002.
Said real property is subject only to the following described liens, claims,
security interests, charges, pledges, encumbrances, calls, commitments, options,
conversion rights or privileges of any character whatsoever:
1. 2409 Commerce-Sullivan Note. The balance due, including principal, interest,
tax and insurance escrow, and all other charges, on that certain promissory
note executed by John E. and Nell G. Calaway, in the original principal sum
of $51,750.00, dated April 18, 1989, payable to Mary Sullivan, Houston,
Texas, and secured by deed of trust on the real property located at 2409
Commerce, Houston, Texas, recorded in the Real Property Records of Harris
County, Texas.
2. 2409 Commerce-Southwest Minerals, Inc. Note. The balance due, including
principal, interest and all other charges, on that certain promissory note
executed by John E. Calaway, in the original principal amount of $75,383.56,
dated October 1, 1993, payable to Southwest Minerals, Inc., secured by a
second lien on the real property located at 2409 Commerce, Houston, Texas,
recorded in the Real Property Records of Harris County, Texas.
<PAGE>
APPENDIX B
TO PARTNERSHIP AGREEMENT
BY AND AMONG
CALAWAY OIL AND GAS CORPORATION
AND
JOHN E. CALAWAY
Notwithstanding anything herein to the contrary, the Company is perpetually
retaining 100% of the voting rights with respect to the Edge Stock, subject to
all existing voting agreements. This reservation of voting rights will survive
liquidation, dissolution or termination of this Agreement. The Company is also
retaining a Right of First Refusal to purchase the Edge Stock on the same terms
and conditions as any bona fide third party offer for a period of five (5)
business days after receiving notice in accordance with the terms of this
agreement of the terms of any proposed sale. The Partnership and Nell G. Calaway
will give such notice to the Company within three (3) business days of receipt
of any such offer they desire to accept.
<PAGE>
ASSIGNMENT OF PARTNERSHIP INTEREST
This Assignment of Partnership Interest (the "Agreement") is made and
entered into this 29th of June, 1994, by and among John E. Calaway ("Assignor"),
Nell Calaway ("Assignee"), and Calaway Oil & Gas Corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company and Assignor entered into that Partnership Agreement,
dated June 29, 1994 (the "Partnership Agreement"), forming Calaway Partners, a
Texas general partnership (the "Partnership");
WHEREAS, incident to their divorce, Assignor has agreed to convey his
interest in the Partnership to Assignee; and
WHEREAS, as a condition of Assignee's acceptance of the assignment and her
agreement to the divorce decree, Assignor, on his own behalf and on behalf of
the Company (of which he is the sole shareholder), has agreed that Assignee will
have certain rights to require the Partnership to redeem her interest therein
with certain of the Partnership's assets; and
WHEREAS, the parties hereto wish to confirm such conveyance, assignment,
and assumption by Assignee of Assignor's right, title, and interest under the
Partnership Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein contained
and as a gift without other consideration, the parties hereby agree as follows:
ARTICLE I
CONVEYANCE, ASSIGNMENT, AND ASSUMPTION
SECTION 1.1 Assignor hereby unconditionally and irrevocably assigns,
conveys, transfers and delivers to Assignee and Assignee hereby accepts from
Assignor, at and as of the date hereof, Assignor's entire right, title, and
interest as a partner of the Partnership (the "Transferred Interest").
SECTION 1.2 Assignee hereby unconditionally and irrevocably (i) accepts and
assumes, at and as of the date hereof, all of the liabilities and obligations of
Assignor now or hereafter existing under or in connection with the Partnership
Agreement and attributable to the Transferred Interest, and (ii) agrees to be
bound by the terms and conditions of the Partnership Agreement, a copy of which
is attached hereto as Exhibit "A".
SECTION 1.3 The parties hereby agree that from and after the date hereof
and for all purposes under the Partnership Agreement, Assignee shall become and
be a substituted Partner of the Partnership, and all references to the Partners
in the Partnership Agreement
<PAGE>
shall be deemed to refer to Assignee as a Partner, and Assignee shall be
entitled to the full benefits and be bound thereby as a Partner to the same
extent as if an original party thereto.
ARTICLE II
CONSENT TO ASSIGNMENT
SECTION 2.1 The Company acknowledges and agrees that the assignment
contemplated by this Agreement is a Permitted Transfer within the meaning of
Section 10.2(b)(i) of the Partnership Agreement and that all actions or
deliveries required by Section 10.2(c) of the Partnership Agreement have been
satisfied or are hereby waived.
SECTION 2.2 The Company hereby consents to the conveyance, assignment, and
assumption contemplated herein, and acknowledges and agrees that Assignee shall
be admitted as a substituted Partner in the Partnership.
ARTICLE III
RIGHT OF REDEMPTION
SECTION 3.1 At any time after June 30, 1999 and prior to a Liquidating
Event (as such term is defined in Section 13.1 of the Partnership Agreement),
Assignee shall have the option to cause the Partnership to distribute the Edge
Stock (as such term is defined in the Partnership Agreement) to Assignee in
complete redemption of her interest in the Partnership. Assignee's option to
cause a redemption of her interest pursuant to this Article III shall be
exercised by delivering written notice to the Partnership and the other partners
of her desire to cause such a redemption. The Edge Stock shall be delivered to
Assignee within ten business days of the Partnership's receipt of such notice
and Assignee's interest in the Partnership and her rights under the Partnership
Agreement shall completely terminate upon her receipt of the Edge Stock.
SECTION 3.2 The Company hereby consents to Assignee's right of redemption
hereunder and agrees that it shall cause the Partnership to distribute the Edge
Stock to Assignee if Assignee exercises the option set forth in Section 3.1
hereof.
ARTICLE IV
MISCELLANEOUS
SECTION 4.1 This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Texas, without regard to principles of
conflicts of law.
SECTION 4.2 This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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<PAGE>
SECTION 4.3 This Agreement and the rights and obligations hereunder shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
IN WITNESS WHEREOF, this Agreement has been executed and shall take effect
as of the date first above written.
ASSIGNEE:
/s/ Nell Calaway
----------------------------------
Nell Calaway
ASSIGNOR:
/s/ John E. Calaway
----------------------------------
John E. Calaway, Individually and
on behalf of Calaway Partners, as
a Partner thereof
COMPANY:
Calaway Oil & Gas Corporation,
Individually and on behalf of
Calaway Partners, as a Partner
thereof
By: /s/ John E. Calaway
-------------------------------
John E. Calaway, President
-3-
<PAGE>
EXHIBIT C
EMPLOYMENT AGREEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Employment Period........................................................................... 1
2. Terms of Employment......................................................................... 1
(a) Position and Duties.................................................................... 1
(b) Compensation........................................................................... 2
(i) Base Salary.................................................................... 2
(ii) Annual Bonus................................................................... 2
(iii) Incentive, Savings and Retirement Plans........................................ 3
(iv) Welfare Benefit Plans.......................................................... 3
(v) Expenses....................................................................... 3
(vi) Fringe Benefits and Perquisites................................................ 3
(vii) Office and Support Staff....................................................... 3
(viii) Vacation....................................................................... 4
(ix) Stock Option Grants............................................................ 4
(x) Restricted Stock and Other Equity-Based Grants................................. 4
(xi) Life Insurance................................................................. 4
3. Termination of Employment................................................................... 5
(a) Death or Disability.................................................................... 5
(b) Cause.................................................................................. 5
(c) Good Reason; Window Period............................................................. 6
(d) Notice of Termination.................................................................. 7
(e) Date of Termination.................................................................... 7
4. Obligations of the Company upon Termination................................................. 7
(a) Disability, Good Reason or During a Window Period; Other than for Cause................ 7
(b) Death (except during a Window Period).................................................. 10
(c) Cause; Other than for Disability, Good Reason or During a Window Period................ 7
5. Non-exclusivity of Rights................................................................... 11
6. Full Settlement; Resolution of Disputes..................................................... 11
7. Certain Additional Payments by the Company.................................................. 12
8. Confidential Information.................................................................... 15
9. Change of Control........................................................................... 15
10. Covenant Not to Compete..................................................................... 19
11. Successors.................................................................................. 20
12. Miscellaneous............................................................................... 21
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENT
This AGREEMENT (the "Agreement") by and between Edge Petroleum
Corporation, a Delaware corporation (the "Company"), and John E. Calaway (the
"Executive"), dated as of the 3rd day of March, 1997 and to be effective as of
the Agreement Effective Date (as defined in Section 12(h) hereof).
In entering into this Agreement, the Board of Directors of the Company
(the "Board") desires to provide the Executive with substantial incentives to
serve the Company as one of its senior executives performing at the highest
level of leadership and stewardship, without distraction or concern over minimum
compensation, benefits or tenure, to manage the Company's future growth and
development, and maximize the returns to the Company's stockholders.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment Period. As of the Agreement Effective Date (hereinafter
defined), the Company hereby agrees to employ the Executive and the Executive
hereby agrees to accept employment with the Company, in accordance with, and
subject to, the terms and provisions of this Agreement, for the period (the
"Employment Period") commencing on the Agreement Effective Date and ending on
the fifth anniversary of the Agreement Effective Date; provided, on the second
anniversary of the Agreement Effective Date and each anniversary of the
Agreement Effective Date thereafter, the Employment Period shall automatically
renew for an additional one year without any further action by either the
Company or the Executive, it being the intention of the parties that there shall
be continuously a remaining term of not less than three years' duration of the
Employment Period until an event has occurred as described in, or one of the
parties shall have made an appropriate election pursuant to, the provisions of
Section 3.
2. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate in
all material respects with the most significant of those held, exercised
and assigned on the Agreement Effective Date, which shall in any event
include status as Chairman of the Board and Chief Executive Officer of
the Company, and (B) the Executive's services shall be performed within
the Houston, Texas metropolitan area.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote full attention and time during normal business hours to
the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to
use
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<PAGE>
the Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period, it shall
not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such
activities do not interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the
Agreement Effective Date, the continued conduct of such activities (or
the conduct of activities similar in nature and scope thereto) subsequent
to the Agreement Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive shall
receive an annual base salary equal to the base salary in effect
immediately prior to the Agreement Effective Date ("Annual Base Salary"),
which shall be paid on a semimonthly basis. During the Employment Period,
the Annual Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be substantially
consistent with increases in base salary generally awarded in the
ordinary course of business to executives of the Company and its
affiliated companies. Any increase in Annual Base Salary shall not serve
to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such
increase and the term "Annual Base Salary," as utilized in this
Agreement, shall refer to Annual Base Salary as so increased. As used in
this Agreement, the term "affiliated companies" shall include, when used
with reference to the Company, any company controlled by, controlling or
under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year or portion thereof during the
Employment Period, an Annual Bonus (the "Annual Bonus"), in cash equal to
the amount determined in the following table based on the Company's
audited annual net cash flow increase relative to the audited net cash
flow of the Company for the prior calendar year:
Percent of Increase
In Audited Net Cash Flow Bonus Amount
------------------------ ------------
Less than 15% 0
Greater than 15% and less than 25% 50,000
Greater than 25% 105,000
(iii) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans that
2
<PAGE>
are tax-qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended ("Code"), and all plans that are supplemental to any
such tax-qualified plans, in each case to the extent that such plans are
applicable generally to other executives of the Company and its
affiliated companies, but in no event shall such plans provide the
Executive with incentive opportunities (measured with respect to both
regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement
benefit opportunities that are, in each case, less favorable to the
Executive, in the aggregate, than the most favorable plans of the Company
and its affiliated companies. As used in this Agreement, the term "most
favorable" shall, when used with reference to any plans, practices,
policies or programs of the Company and its affiliated companies, be
deemed to refer to the plans, practices, policies or programs of the
Company and its affiliated companies, as in effect at any time during the
Employment Period and provided generally to other executives of the
Company or its affiliated companies, which are most favorable to the
Executive.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by the
Company or its affiliated companies (including, without limitation,
medical, prescription, dental, vision, disability, salary continuance,
group life and supplemental group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally
to other executives of the Company or its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the
Executive with benefits that are less favorable, in the aggregate, than
the most favorable such plans, practices, policies and programs of the
Company and its affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies.
(vi) Fringe Benefits and Perquisites. During the Employment Period,
the Executive shall be entitled to fringe benefits and perquisites in
accordance with the most favorable plans, practices, programs and
policies of the Company and its affiliated companies applicable to
similarly situated executives.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to secretarial and other
assistance to the extent needed to fulfill his corporate
responsibilities, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at
any time during the Employment Period.
3
<PAGE>
(viii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated
companies.
(ix) Stock Option Grants. Prior to or contemporaneously with the
execution of this Agreement, Executive has been granted stock options on
133,645 shares of Company common stock, par value $.01 per share ("Common
Stock"), at an exercise price equal to the IPO Price ("Initial Stock
Option"). The Initial Stock Option has a term of 10 years and is
exercisable in cumulative annual increments of one-fifth of the total
number of shares subject to the option, beginning on the first
anniversary of the Date of Grant. "IPO" shall mean the initial public
offering of Common Stock pursuant to which the Company receives payment
in cash for shares of its Common Stock that it sells pursuant to a
registration statement on Form S-1 filed and declared effective under the
Securities Act of 1933. "IPO Price" shall mean the per share price to the
public for the Common Stock sold in the IPO, as set forth on the cover
page of the final prospectus for the IPO.
(x) Restricted Stock and Other Equity-Based Grants. Prior to or
contemporaneously with the execution of this Agreement, Executive has
been granted a restricted stock award of 66,823 shares of Company Common
Stock that will vest ratably over five years, beginning with the first
anniversary of the date of grant, and an additional 66,823 shares of
Company Common Stock that will vest on the earlier to occur of 10 years
from the date of grant or the achievement of certain performance goals
("Initial Restricted Stock Grant"). The tranche of Initial Restricted
Stock Grant subject to performance goals will vest earlier than 10 years
only if the average closing price per share of Common Stock for the month
of December of any year, as compared with the month of January for the
same year (the "Annual Growth"), has increased by 25% or more, then only
20% of the tranche will vest. If the Annual Growth for a particular year
is not at least 25% and as a result none of the tranche vests for such a
year (a "Nonachieving Year"), then a deficit equal to 25% less the
Nonachieving Year Annual Growth shall exist. In the year subsequent to a
Nonachieving Year, an additional 20% of the performance share tranche
will vest if the Annual Growth for such subsequent year is at least 25%
plus the deficit for the Nonachieving Year.
(xi) Life Insurance. Within 60 days of the Agreement Effective Date,
Executive shall be provided term life insurance coverage in an amount not
less than $2,000,000 during the succeeding portion of the Employment
Period; provided that such coverage can be purchased at standard rates
within such 60 days of the Agreement Effective Date.
3. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written
4
<PAGE>
notice in accordance with Section 11(d) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to full-
time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for either (i) 180 consecutive business
days or (ii) in any two-year period 270 nonconsecutive business days as a result
of incapacity due to mental or physical illness which is determined to be total
and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean for the Company's termination of the Executive's employment: (i) the
Executive's final conviction of a felony crime that enriched the Executive at
the expense of the Company; provided, however, that after indictment, the
Company may suspend Executive from the rendition of services, but without
limiting or modifying in any other way the Company's obligations under this
Agreement; (ii) a material breach by Executive of a material fiduciary duty owed
to the Company; (iii) a material breach by Executive of any of the covenants
made by him in Sections 8 and 10 hereof; (iv) the willful and gross neglect by
Executive of the material duties specifically and expressly required by this
Agreement; or (v) the Executive's continuing failure to substantially perform
his duties and responsibilities hereunder (except by reason of the Executive's
incapacity due to physical or mental illness or injury) for a period of 45 days
after the Required Board Majority, as defined herein, has delivered to the
Executive a written demand for substantial performance hereunder which
specifically identifies the bases for the Required Board Majority's
determination that the Executive has not substantially performed his duties and
responsibilities hereunder (that period being the "Grace Period"); provided,
that for purposes of this clause (v), the Company shall not have Cause to
terminate the Executive's employment unless (A) at a meeting of the Board called
and held following the Grace Period in the city in which the Company's principal
executive offices are located, of which the Executive was given not less than 10
days' prior written notice and at which the Executive was afforded the
opportunity to be represented by counsel, appear and be heard, the Required
Board Majority shall adopt a written resolution which (1) sets forth the
Required Board Majority's determination that the failure of the Executive to
substantially perform his duties and responsibilities hereunder has (except by
reason of his incapacity due to physical or mental illness or injury) continued
past the Grace Period and (2) specifically identifies the bases for that
determination, and (B) the Company, at the written direction of the Required
Board Majority, shall deliver to the Executive a Notice of Termination for Cause
to which a copy of that resolution, certified as being true and correct by the
secretary or any assistant secretary of the Company, is attached. "Required
Board Majority" means at any time a majority of the members of the Board at that
time which includes at least a majority of the Directors, each of whom has not
been an employee of the Company or any subsidiary of the Company.
5
<PAGE>
(c) Good Reason; Window Period. The Executive's employment may be
terminated during the Employment Period by the Executive for Good Reason, or
during a Window Period by the Executive without any reason. For purposes of
this Agreement, "Window Period" shall mean the 60-day period immediately
following elapse of one year after any Change of Control as defined in Section 9
of this Agreement. For purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties materially
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 2 of this Agreement, or
any other action by the Company which results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(ii) any material failure by the Company to comply with any of the
provisions of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any
office outside the Houston metropolitan area;
(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement;
(v) any failure by the Company to comply with and satisfy the
requirements of Section 11 of this Agreement, provided that (A) the
successor described in Section 11(c) has received, at least 10 days
prior to the Date of Termination (as defined in subparagraph (e)
below), written notice from the Company or the Executive of the
requirements of such provision and (B) such failure to be in
compliance and satisfy the requirements of Section 11 shall continue
as of the Date of Termination; or
(vi) any failure to reelect Executive as a member of the Board and
Chairman of the Board.
(d) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason or without any reason during a Window
Period, shall be communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(d) of this Agreement. The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder or preclude the
6
<PAGE>
Executive or the Company from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
(e) Date of Termination. For purposes of this Agreement, the term
"Date of Termination" means (i) if the Executive's employment is terminated by
the Company for Cause, or by the Executive during a Window Period or for Good
Reason, the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the Executive of
such termination and (iii) if the Executive's employment is terminated by reason
of death or Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may be.
4. Obligations of the Company upon Termination.
(a) Disability, Good Reason or During a Window Period; Other than for
Cause or Death (except during a Window Period). If, during the Employment
Period, the Company shall terminate the Executive's employment other than for
Cause, including a termination by reason of Disability (but not by reason of
death), or the Executive shall terminate employment for Good Reason or his
employment shall be terminated during a Window Period by the Company for Cause,
by the Executive without any reason, or by reason of death:
(i) the Company shall pay or provide to or in respect of the
Executive the following amounts and benefits:
A. in a lump sum in cash, within 10 days after the Date of
Termination, an amount equal to the sum of (1) the Executive's
Annual Base Salary through the Date of Termination, (2) any
deferred compensation previously awarded to or earned by the
Executive (together with any accrued interest or earnings thereon)
and (3) any compensation for unused vacation time for which the
Executive is eligible in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated
companies, in each case to the extent not theretofore paid (the
sum of the amounts described in clauses (1), (2) and (3) shall be
hereinafter referred to as the "Accrued Obligation");
B. in a lump sum in cash, discounted at 6%, within 10 days
after the Date of Termination, an amount equal to 125% of Annual
Base Salary that would have been paid to the Executive pursuant to
this Agreement for the period (the "Remaining Employment Period")
beginning on the Date of Termination and ending on the latest
possible date of termination of the Employment Period in
accordance with the provisions of Section 1 hereof (the "Final
Expiration Date") if the Executive's employment had not been
terminated;
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C. continuation for the Remaining Employment Period of life
insurance and medical benefits coverages, but with the Company's
medical benefits coverages being secondary to any coverages
provided by another employer;
D. effective as of the Date of Termination, (1) immediate
vesting and exercisability of, and termination of any restrictions
on sale or transfer (other than any such restriction arising by
operation of law) with respect to, each and every stock option,
restricted stock award, restricted stock unit award and other
equity-based award and performance award (each, a "Compensatory
Award") that is outstanding as of a time immediately prior to the
Date of Termination except that the portion of any restricted stock
award described in Section 2(b)(x) that would vest only by reason
of a achievement of performance goals and not solely by reason of
continued employment shall vest only if termination is by the
Company without Cause or by Employee for Good Reason or in a Window
Period and either (w) termination occurs in the first year of the
Employment Period in which event the unvested portion shall be 100%
vested, (x) termination occurs in the second year of the Employment
Period in which event 80% of the unvested portion shall be vested,
(y) termination occurs in the third year of the Employment Period
in which event 60% of the unvested portion shall be vested or (z)
termination occurs after the third year of the Employment Period
and the performance goals have been met in each of the first three
years of the Employment Period in which event all unvested shares
shall be vested, (2) the extension of the term during which each
and every Compensatory Award may be exercised by the Executive
until the earlier of (x) the first anniversary of the Date of
Termination or (y) the date upon which the right to exercise any
Compensatory Award would have expired if the Executive had
continued to be employed by the Company under the terms of this
Agreement until the Final Expiration Date and (3) at the sole
election of Executive, in exchange for any or all Compensatory
Awards that are either denominated in or payable in Common Stock,
an amount in cash equal to the excess of (x) the Highest Price Per
Share (as defined below) over (y) the exercise or purchase price,
if any, of such Compensatory Awards. As used herein, the term
"Highest Price Per Share" shall mean the highest price per share
that can be determined to have been paid or agreed to be paid for
any share of Common Stock by a Covered Person (as defined below) at
any time during the Employment Period or the six-month period
immediately preceding the Agreement Effective Date. As used herein,
the term "Covered Person" shall mean any Person other than an
Exempt Person (in each case as defined in Section 9 hereof) who (I)
is the Beneficial Owner (as defined in Section 9 hereof) of 10% or
more of the outstanding shares of Common Stock or 10% or more of
the combined voting power of the outstanding Voting Stock (as
defined in Section 9 hereof) of the Company at any time during the
Employment Period, (II) is a Person who has any material
involvement in proposing or effectuating the Change of Control (as
defined in Section 9 hereof) or (III) is an assignee of or has
otherwise succeeded to any shares of Common Stock or Voting Stock
of the Company which were at any time during
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the Employment Period "beneficially owned" (as defined in Section
9 hereof) by any Person identified in clause (I) or (II) of this
definition, if such assignment or succession shall have occurred
in the course of a privately negotiated transaction rather than an
open market transaction. For purposes of determining whether a
Person is a Covered Person, the number of shares of Common Stock
or Voting Stock of the Company deemed to be outstanding shall
include shares of which the Person is deemed the Beneficial Owner,
but shall not include any other shares which may be issuable
pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options. In determining
the Highest Price Per Share, the price paid or agreed to be paid
by a Covered Person will be appropriately adjusted to take into
account (W) distributions paid or payable in stock, (X)
subdivisions of outstanding stock, (Y) combinations of shares of
stock into a smaller number of shares and (Z) similar events; and
E. as soon as practicable following the calendar year of the
date of termination, an amount equal to the product of (x) the
Annual Bonus that would have been paid to Executive with respect
to the year of termination had the Date of Termination not
occurred and (y) a fraction, the numerator of which is the number
of days in the fiscal year through the Date of Termination and the
denominator of which is 365;
(ii) for the Remaining Employment Period, or such longer period as
any plan, program, practice or policy may provide, the Company shall
continue benefits to the Executive and/or the Executive's family at
least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described
in Sections 2(b)(iv) of this Agreement if the Executive's employment
had not been terminated in accordance with the most favorable plans,
practices, programs or policies of the Company and its affiliated
companies (such continuation of such benefits for the applicable
period herein set forth shall be hereinafter referred to as "Welfare
Benefit Continuation"). For purposes of determining eligibility of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until the Final Expiration Date and to have retired
on such date.
(b) Death (except during a Window Period). If the Executive's
employment is terminated by reason of the Executive's death during the
Employment Period and other than during a Window Period in which event the
provisions of Section 4(a) shall govern, this Agreement shall terminate without
further obligations to the Executive's legal representatives under this
Agreement, other than (i) the payment of Accrued Obligations (which shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination), (ii) the payment of an amount
equal to the Annual Salary that would have been paid to the Executive pursuant
to this Agreement for the period beginning on the Date of Termination and ending
on the first anniversary thereof if the Executive's employment had not
terminated by reason of death (which shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30
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days of the Date of Termination), (iii) during the period beginning on the Date
of Termination and ending on the first anniversary thereof medical benefits
coverage determined as if Executive's employment had not terminated by reason of
death, (iv) as soon as practicable following the fiscal year in which death
occurs, payment of an amount equal to the product of (x) the Annual Bonus that
would have been paid to Executive with respect to the year of termination had
the Date of Termination not occurred and (y) a fraction, the numerator of which
is the number of days in the fiscal year through the Date of Termination and the
denominator of which is 365 and (v) effective as of the Date of Termination, (A)
immediate vesting and exercisability of, and termination of any restrictions on
sale or transfer (other than any such restriction arising by operation of law)
with respect to, each and every Compensatory Award outstanding as of a time
immediately prior to the Date of Termination except the portion of any
restricted stock award described in Section 2(b)(x) that would vest only by
reason of achievement of performance goals and not by solely by reason of
continued employment shall vest only if either (w) death occurs in the first
year of the Employment Period in which event the unvested portion shall be 100%
vested, (x) death occurs in the second year of the Employment Period in which
event 80% of the unvested portion shall be vested, (y) death occurs in the third
year of the Employment Period in which event 60% of the unvested portion shall
be vested or (z) death occurs after the third year of the Employment Period and
the performance goals have been met in each of the first three years of the
Employment Period in which event all unvested shares shall be vested, (B) the
extension of the term during which each and every Compensatory Award may be
exercised or purchased by the Executive until the earlier of (1) the first
anniversary of the Date of Termination or (2) the date upon which the right to
exercise or purchase any Compensatory Award would have expired if the Executive
had continued to be employed by the Company under the terms of this Agreement
until the Final Expiration Date and (C) at the sole election of the Executive's
legal representative, in exchange for any Compensatory Award that is either
denominated in or payable in Common Stock, an amount in cash equal to the excess
of (1) the Highest Price Per Share over (2) the exercise or purchase price, if
any, of such Compensatory Award.
(c) Cause; Other than for Disability, Good Reason or During a Window
Period. If the Executive's employment shall be terminated for Cause during the
Employment Period and other than during a Window Period, in which event the
provisions of Section 4(a) shall govern, this Agreement shall terminate without
further obligations to the Executive other than for Accrued Obligations. If the
Executive terminates employment during the Employment Period, excluding a
termination for any of Disability, Good Reason or without any reason during a
Window Period, in which event the provisions of Section 4(a) shall govern, this
Agreement shall terminate without further obligations to the Executive, other
than for the payment of Accrued Obligations. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
5. Non-exclusivity of Rights. Except as provided in Section 4 of this
Agreement, nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or
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otherwise affect such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated companies. Amounts which
are vested benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of or any contract or agreement with
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as such plan, policy, practice or
program is superseded by this Agreement.
6. Full Settlement; Resolution of Disputes.
(a) The Company's obligation to make payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any setoff, counterclaim, recoupment, defense, mitigation or other
claim, right or action which the Company may have against the Executive or
others. The Company agrees to pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any such payment pursuant to this Agreement), plus in each case interest on
any delayed payment at the annual percentage rate which is three percentage
points above the interest rate shown as the Prime Rate in the Money Rates column
in the then most recently published edition of The Wall Street Journal
(Southwest Edition), or, if such rate is not then so published on at least a
weekly basis, the interest rate announced by Chase Manhattan Bank (or its
successor), from time to time, as its Base Rate (or prime lending rate), from
the date those amounts were required to have been paid or reimbursed to the
Employee until those amounts are finally and fully paid or reimbursed; provided,
however, that in no event shall the amount of interest contracted for, charged
or received hereunder exceed the maximum non-usurious amount of interest allowed
by applicable law; provided, further, that if the Executive is not the
prevailing party in any such contest, then he shall, upon the conclusion
thereof, repay to the Company any amounts that were previously advanced pursuant
to this sentence by the Company as payment of legal fees and expenses.
(b) If there shall be any dispute between the Company and the
Executive concerning (i) in the event of any termination of the Executive's
employment by the Company, whether such termination was for Cause or Disability,
or (ii) in the event of any termination of employment by the Executive, whether
Good Reason existed or whether such termination occurred during a Window Period,
then, unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or
Disability or that the determination by the Executive of the existence of Good
Reason was not made in good faith or that the termination by the Executive did
not occur during a Window Period, the Company shall pay all amounts, and provide
all benefits, to the Executive and/or the Executive's family or other
beneficiaries, as the case may be, that the Company would be required to pay or
provide pursuant to Section 4(a) hereof as though such termination were by the
Company without Cause or by the Executive with Good Reason or during a Window
Period; provided, however, that the Company
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shall not be required to pay any disputed amounts pursuant to this paragraph
except upon receipt of an undertaking by or on behalf of the Executive to repay
all such amounts to which the Executive is ultimately adjudged by such court not
to be entitled.
7. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
7 (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 7(c), all determinations
required to be made under this Section 7, including whether and when Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Deloitte &
Touche LLP (the "Accounting Firm"); provided, however, that the Accounting Firm
shall not determine that no Excise Tax is payable by the Executive unless it
delivers to the Executive a written opinion (the "Accounting Opinion") that
failure to report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. In the event that by Deloitte & Touche LLP has served, at any time
during the two years immediately preceding a Change in Control Date, as
accountant or auditor for the individual, entity or group that is involved in
effecting or has any material interest in the Change in Control, the Executive
shall appoint another nationally recognized accounting firm to make the
determinations and perform the other functions specified in this Section 7
(which accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is requested by
the Company, the Accounting Firm shall make all determinations required under
this Section 7, shall provide to the Company and the Executive a written report
setting forth such determinations, together with detailed supporting
calculations, and, if the Accounting Firm determines that no Excise Tax is
payable, shall deliver the Accounting Opinion to the Executive. Any Gross-Up
Payment, as determined pursuant to this Section 7, shall be paid by the Company
to the Executive within five days of the receipt of the Accounting Firm's
determination. Subject to the remainder of this Section 7, any determination by
the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the
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Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made by the
Company should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that it is ultimately determined in
accordance with the procedures set forth in Section 7(c) that the Executive is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claims by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 30 days after the Executive actually receives
notice in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid; provided,
however, that the failure of the Executive to notify the Company of such claim
(or to provide any required information with respect thereto) shall not affect
any rights granted to the Executive under this Section 7 except to the extent
that the Company is materially prejudiced in the defense of such claim as a
direct result of such failure. The Executive shall not pay such claim prior to
the expiration of the 30-day period following the date on which he gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney selected by the Company and reasonably acceptable to
the Executive;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim; and
(iv) if the Company elects not to assume and control the defense of
such claim, permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 7(c), the Company shall have the right, at its sole option, to
assume the defense of and control all proceedings in connection with such
contest, in which case it may pursue or forego any and all administrative
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appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim, and may either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided, that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's right to assume the defense of and control
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 7(c) the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 7(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 7(c) a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim, and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement) (referred to herein as "Confidential Information"). After termination
of the Executive's employment with the Company, the Executive shall not, without
the prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it. In no event shall
an asserted violation of the provisions of this Section 8 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement. Also, within 10 days of the termination of Executive's
employment for any reason, Executive shall return to Company all documents and
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other tangible items of or containing Company information which are in
Executive's possession, custody or control.
9. Change of Control.
As used in this Agreement, the terms set forth below shall have the
following respective meanings:
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as in effect on the
date of this Agreement.
"Associate" shall mean, with reference to any Person, (a) any
corporation, firm, partnership, association, unincorporated organization or
other entity (other than the Company or a subsidiary of the Company) of which
such Person is an officer or general partner (or officer or general partner of a
general partner) or is, directly or indirectly, the Beneficial Owner of 10% or
more of any class of equity securities, (b) any trust or other estate in which
such Person has a substantial beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity and (c) any relative or
spouse of such Person, or any relative of such spouse, who has the same home as
such Person.
"Beneficial Owner" shall mean, with reference to any securities, any
Person if:
(a) such Person or any of such Person's Affiliates and Associates,
directly or indirectly, is the "beneficial owner" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the
Exchange Act, as in effect on the date of this Agreement) such securities
or otherwise has the right to vote or dispose of such securities,
including pursuant to any agreement, arrangement or understanding
(whether or not in writing); provided, however, that a Person shall not
be deemed the "Beneficial Owner" of, or to "beneficially own," any
security under this subsection (a) as a result of an agreement,
arrangement or understanding to vote such security if such agreement,
arrangement or understanding: (i) arises solely from a revocable proxy or
consent given in response to a public (i.e., not including a solicitation
exempted by Rule 14a-2(b)(2) of the General Rules and Regulations under
the Exchange Act) proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act and (ii) is not then reportable by
such Person on Schedule 13D under the Exchange Act (or any comparable or
successor report);
(b) such Person or any of such Person's Affiliates and Associates,
directly or indirectly, has the right or obligation to acquire such
securities (whether such right or obligation is exercisable or effective
immediately or only after the passage of time or the occurrence of an
event) pursuant to any agreement, arrangement or understanding (whether
or not in writing) or upon the exercise of conversion rights, exchange
rights, other rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the
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Beneficial Owner of, or to "beneficially own," (i) securities tendered
pursuant to a tender or exchange offer made by such Person or any of
such Person's Affiliates or Associates until such tendered securities
are accepted for purchase or exchange or (ii) securities issuable upon
exercise of Exempt Rights; or
(c) such Person or any of such Person's Affiliates or Associates (i)
has any agreement, arrangement or understanding (whether or not in
writing) with any other Person (or any Affiliate or Associate thereof)
that beneficially owns such securities for the purpose of acquiring,
holding, voting (except as set forth in the proviso to subsection (a) of
this definition) or disposing of such securities or (ii) is a member of a
group (as that term is used in Rule 13d-5(b) of the General Rules and
Regulations under the Exchange Act) that includes any other Person that
beneficially owns such securities;
provided, however, that nothing in this definition shall cause a Person engaged
in business as an underwriter of securities to be the Beneficial Owner of, or to
"beneficially own," any securities acquired through such Person's participation
in good faith in a firm commitment underwriting until the expiration of 40 days
after the date of such acquisition. For purposes hereof, "voting" a security
shall include voting, granting a proxy, consenting or making a request or demand
relating to corporate action (including, without limitation, a demand for a
stockholder list, to call a stockholder meeting or to inspect corporate books
and records) or otherwise giving an authorization (within the meaning of Section
14(a) of the Exchange Act) in respect of such security.
The terms "beneficially own" and "beneficially owning" shall have
meanings that are correlative to this definition of the term "Beneficial Owner."
"Change of Control" shall mean any of the following occurring on or
after the Agreement Effective Date except that the transactions contemplated by
the Combination Agreement dated as of December 3, 1996, by and among the
Company, Edge Petroleum Corporation, a Texas corporation, Edge Mergeco, Inc.,
Gulfedge Limited Partnership, Edge Group II Limited Partnership and Edge Group
Partnership shall not constitute a Change of Control:
(a) any Person (other than an Exempt Person) shall become the
Beneficial Owner of 40% or more of the shares of Common Stock then
outstanding or 40% or more of the combined voting power of the Voting
Stock of the Company then outstanding; provided, however, that no Change
of Control shall be deemed to occur for purposes of this subsection (a)
if such Person shall become a Beneficial Owner of 40% or more of the
shares of Common Stock or 40% or more of the combined voting power of the
Voting Stock of the Company solely as a result of (i) an Exempt
Transaction or (ii) an acquisition by a Person pursuant to a
reorganization, merger or consolidation, if, following such
reorganization, merger or consolidation, the conditions described in
clauses (i), (ii) and (iii) of subsection (c) of this definition are
satisfied;
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(b) individuals who, as of the Agreement Effective Date, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Agreement Effective Date whose
election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board; provided, further, that
there shall be excluded, for this purpose, any such individual whose
initial assumption of office occurs as a result of any actual or
threatened election contest that is subject to the provisions of
Rule 14a-11 under the Exchange Act;
(c) approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than 85% of the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation and the combined voting power of
the then outstanding Voting Stock of such corporation beneficially owned,
directly or indirectly, by all or substantially all of the Persons who
were the Beneficial Owners of the outstanding Common Stock immediately
prior to such reorganization, merger or consolidation in substantially
the same proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the outstanding Common Stock,
(ii) no Person (excluding any Exempt Person or any Person beneficially
owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 40% or more of the Common Stock
then outstanding or 40% or more of the combined voting power of the
Voting Stock of the Company then outstanding) beneficially owns, directly
or indirectly, 40% or more of the then outstanding shares of common stock
of the corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding Voting
Stock of such corporation and (iii) at least a majority of the members of
the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement or initial
action by the Board providing for such reorganization, merger or
consolidation; or
(d) approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company unless such liquidation or
dissolution is approved as part of a plan of liquidation and dissolution
involving a sale or disposition of all or substantially all of the assets
of the Company to a corporation with respect to which, following such
sale or other disposition, all of the requirements of clauses (ii)(A),
(B) and (C) of this subsection (d) are satisfied, or (ii) the sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which, following
such sale or other disposition, (A) more than 85% of the then outstanding
shares of common stock of such corporation and the combined voting power
of the Voting Stock of such corporation is then beneficially owned,
directly or indirectly, by all or substantially all of the Persons who
were the Beneficial Owners of the outstanding Common Stock immediately
prior to such sale or other disposition in substantially the same
proportion as their ownership, immediately prior
17
<PAGE>
to such sale or other disposition, of the outstanding Common Stock, (B)
no Person (excluding any Exempt Person and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 40% or more of the Common Stock then outstanding or 40% or
more of the combined voting power of the Voting Stock of the Company then
outstanding) beneficially owns, directly or indirectly, 40% or more of
the then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding Voting Stock of such
corporation and (C) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement or initial action of the
Board providing for such sale or other disposition of assets of the
Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exempt Person" shall mean the Company, any subsidiary of the Company,
any employee benefit plan of the Company or any subsidiary of the Company, and
any Person organized, appointed or established by the Company for or pursuant to
the terms of any such plan.
"Exempt Rights" shall mean any rights to purchase shares of Common
Stock or other Voting Stock of the Company if at the time of the issuance
thereof such rights are not separable from such Common Stock or other Voting
Stock (i.e., are not transferable otherwise than in connection with a transfer
of the underlying Common Stock or other Voting Stock) except upon the occurrence
of a contingency, whether such rights exist as of the Agreement Effective Date
or are thereafter issued by the Company as a dividend on shares of Common Stock
or other Voting Securities or otherwise.
"Exempt Transaction" shall mean an increase in the percentage of the
outstanding shares of Common Stock or the percentage of the combined voting
power of the outstanding Voting Stock of the Company beneficially owned by any
Person solely as a result of a reduction in the number of shares of Common Stock
then outstanding due to the repurchase of Common Stock or Voting Stock by the
Company, unless and until such time as (a) such Person or any Affiliate or
Associate of such Person shall purchase or otherwise become the Beneficial Owner
of additional shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock or additional Voting Stock representing 1% or
more of the combined voting power of the then outstanding Voting Stock, or (b)
any other Person (or Persons) who is (or collectively are) the Beneficial Owner
of shares of Common Stock constituting 1% or more of the then outstanding shares
of Common Stock or Voting Stock representing 1% or more of the combined voting
power of the then outstanding Voting Stock shall become an Affiliate or
Associate of such Person.
"Person" shall mean any individual, firm, corporation, partnership,
association, trust, unincorporated organization or other entity.
"Voting Stock" shall mean, with respect to a corporation, all
securities of such corporation of any class or series that are entitled to vote
generally in the election of directors of such
18
<PAGE>
corporation (excluding any class or series that would be entitled so to vote by
reason of the occurrence of any contingency, so long as such continency has not
occurred).
10. Covenant Not to Compete.
(a) Executive recognizes that in each of the highly competitive
businesses in which the Company is engaged, personal contact is of primary
importance in securing new customers and in retaining the accounts and goodwill
of present customers and protecting the business of the Company. The Executive,
therefore, agrees that during the Employment Period and, if the Date of
Termination occurs by reason of the Executive terminating his employment for
reasons other than Disability or Good Reason and other than during a Window
Period, for a period of two years after the Date of Termination, he will not,
either within 100 miles of any geographic location with respect to which he has
devoted substantial attention to the material business interests of the Company
(other than the Company's home office) or any of its affiliated companies or
with respect to any immediate geologic trends in which the Company or any of its
affiliated companies is active as of the Date of Termination without regard, in
either case, to whether the Executive has worked at such location (the "Relevant
Geographic Area"), with respect to only the Relevant Geographic Area, (i) accept
employment or render service to any person that is engaged in a business
directly competitive with the business then engaged in by the Company or any of
its affiliated companies or (ii) enter into or take part in or lend his name,
counsel or assistance to any business, either as proprietor, principal,
investor, partner, director, officer, executive, consultant, advisor, agent,
independent contractor, or in any other capacity whatsoever, for any purpose
that would be competitive with the business of the Company or any of its
affiliated companies (all of the foregoing activities are collectively referred
to as the "Prohibited Activity").
(b) In addition to all other remedies at law or in equity which the
Company may have for breach of a provision of this Section 10 by the Executive,
it is agreed that in the event of any breach or attempted or threatened breach
of any such provision, the Company shall be entitled, upon application to any
court of proper jurisdiction, to a temporary restraining order or preliminary
injunction (without the necessity of (i) proving irreparable harm, (ii)
establishing that monetary damages are inadequate or (iii) posting any bond with
respect thereto) against the Executive prohibiting such breach or attempted or
threatened breach by proving only the existence of such breach or attempted or
threatened breach. If the provisions of this Section 10 should ever be deemed
to exceed the time, geographic or occupational limitations permitted by the
applicable law, the Executive and the Company agree that such provisions shall
be and are hereby reformed to the maximum time, geographic or occupational
limitations permitted by the applicable law.
(c) The covenants of the Executive set forth in this Section 10 are
independent of and severable from every other provision of this Agreement; and
the breach of any other provision of this Agreement by the Company or the breach
by the Company of any other agreement between the Company and the Executive
shall not affect the validity of the provisions of this Section 10 or constitute
a defense of the Executive in any suit or action brought by the Company to
enforce any of the provisions of this Section 10 or seek any relief for the
breach thereof by Executive.
19
<PAGE>
(d) The Executive acknowledges, agrees and stipulates that: (i) the
terms and provisions of this Agreement are reasonable and constitute an
otherwise enforceable agreement to which the terms and provisions of this
Section 10 are ancillary or a part of as contemplated by Tex. Bus. & Com. Code
Ann. (S)(S) 15.50-15.52; (ii) the consideration provided by the Company under
this Agreement is not illusory; and (iii) the consideration given by the Company
under this Agreement, including, without limitation, the provision by the
Company of Confidential Information to the Executive as contemplated by Section
8, gives rise to the Company's interest in restraining and prohibiting the
Executive from engaging in the Prohibited Activity within the Relevant
Geographic Area as provided under this Section 10, and the Executive's covenant
not to engage in the Prohibited Activity within the Relevant Geographic Area
pursuant to this Section 10 is designed to enforce the Executive's consideration
(or return promises), including, without limitation, the Executive's promise to
not disclose Confidential Information under this Agreement.
11. Successors.
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's heirs,
executors and other legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and may only be assigned to a successor described in Section 11(c).
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas, without reference to principles of conflict
of laws that would require the application of the laws of any other state or
jurisdiction.
(b) The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
(c) This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective successors
and heirs, executors and other legal representatives.
20
<PAGE>
(d) All notices and other communications hereunder shall be in writing
and shall be given, if by the Executive to the Company, by telecopy or facsimile
transmission at the telecommunications number set forth below and, if by either
the Company or the Executive, either by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
-------------------
John E. Calaway
Texaco Heritage Plaza
1111 Bagby, Suite 2100
Houston, Texas 77002
If to the Company:
-----------------
Edge Petroleum Corporation
Texaco Heritage Plaza
1111 Bagby, Suite 2100
Houston, Texas 77002
Telecommunications Number: (713) 654-8960
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(e) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(f) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(g) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason or during a Window Period pursuant to Section 3(c) of
this Agreement, shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
(h) This agreement contains the complete and total understanding of
the parties concerning the subject matter hereof and expressly supersedes any
previous agreement between the parties relating to the subject matter hereof as
well as any agreement between Executive and Edge Petroleum Corporation, a Texas
corporation.
21
<PAGE>
(i) This Agreement shall become effective as of the date on which the
Company first receives payment for shares of its Common Stock that it sells
pursuant to a registration statement filed under the Securities Act of 1933 (the
"Agreement Effective Date").
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
EDGE PETROLEUM CORPORATION
By:/s/ James D. Calaway
---------------------------------
James D. Calaway
President
/s/ John E. Calaway
------------------------------------
John E. Calaway
22
<PAGE>
EXHIBIT E
LOCK-UP LETTER
Raymond James & Associates, Inc.
Jefferies & Company, Inc.
Principal Financial Securities, Inc.
As representatives of the several Underwriters
c/o Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, Florida
Ladies and Gentlemen:
This letter is being delivered to you in connection with the Underwriting
Agreement (the "Underwriting Agreement") that may be executed in connection with
the proposed public offering (the "Offering") between Edge Petroleum Corporation
(the "Company") and you, as representatives of a group of underwriters, relating
to the sale to the underwriters of shares of common stock, par value $0.01 per
share, of the Company (the "Common Stock").
To induce you and the other underwriters to enter into the Underwriting
agreement, the undersigned agrees that during the period beginning on February
21, 1997 and continuing to and including the date 180 days after the date of the
final Prospectus used in connection with the Offering, the undersigned will not
offer, sell, contract to sell or otherwise dispose of, any securities of the
Company that are substantially similar to the Common Stock, including but not
limited to any securities that are convertible into or exchangeable for, or that
represent the right to receive, Common Stock or any such similar securities,
without your prior written consent; provided, however, that the undersigned (i)
may transfer any or all shares of Common Stock held either during the
undersigned's lifetime or on death by will or intestacy to the undersigned's
immediate family ("Immediate family" shall mean spouse, lineal descendent,
father, mother, brother or sister of the undersigned) or to any custodian or
trustee for the account of the undersigned or the undersigned's immediate
family, and (ii) may make a bona fide pledge or mortgage of any shares of Common
Stock with a commercial lending institution; and provided, further, that in any
such case, the undersigned's immediate family or commercial lending institution
shall receive and hold such shares of Common Stock subject to the restrictions
of this lock-up letter, and there shall be no further transfer of such stock
except in accordance with this lock-up letter.
By: /s/ John Calaway
-----------------------------
Printed name: John Calaway
Date: February 25, 1997
<PAGE>
EXHIBIT G
PROMISSORY NOTE
$300,000.00 January 24, 1995
FOR VALUE RECEIVED, the undersigned, John E. Calaway and Calaway Oil &
Gas Corporation (collectively, "Maker") promises to pay to the order of James C.
Calaway ("Payee"), at his address 811 Dallas, Suite 1214, Houston, Texas 77002,
the principal sum of Three Hundred Thousand and No/100 Dollars ($300,000.00),
together with interest on said principal equal to eight percent (8%) per annum.
This Note shall be due and payable as follows:
Principal and accrued interest due and payable in full on or before
January 24, 1998, together with interest on the unpaid principal balance
at 8% per annum. Interest on the outstanding unpaid principal balance
shall be computed in arrears and compounded monthly. Interest shall be
computed from the date principal is advanced.
Interest charges will be calculated on amounts advanced hereunder on the
actual number of days said amounts are outstanding on the basis of a 365/366 day
year, as the case may be. It is the intention of Maker and Payee to conform
strictly to all applicable usury laws. It is therefore agreed that (i) in the
event that the maturity hereof is accelerated by reason of an election by Payee,
all unearned interest shall be cancelled automatically or, if theretofore paid,
shall either be refunded to Maker or credited on the unpaid principal amount of
this Note, whichever remedy is chosen by Payee, (ii) the aggregate of all
interest and other charges constituting interest under applicable law and
contracted for, chargeable or receivable under this Note or otherwise in
connection with the transaction for which this Note is given shall never exceed
the maximum amount of interest, nor produce a rate in excess of the maximum rate
of interest that Payee may charge Maker under applicable law and in regard to
which Maker may not successfully assert the claim or defense of usury, and (iii)
if any excess interest is provided for, it shall be deemed a mistake and the
same shall either be refunded to Maker or credited on the unpaid principal
amount hereof and this Note shall be automatically deemed reformed so as to
permit only the collection of the maximum legal non-usurious rate and amount of
interest. All sums paid or agreed to be paid to the holder of this Note for the
use, forbearance or detention of the indebtedness evidenced hereby to the full
extent allowed by applicable law, shall be amortized, prorated, allocated and
spread through the full term of this Note.
In the event of default in the payment of any installment of principal
or interest when due hereunder, or upon the occurrence of any event of default
under any document or instrument executed in connection with or as security for
this Note, or upon failure in performance of any covenant, agreement, or
obligation to be performed under any documents executed in connection with or as
security for this Note, Payee may declare the entirety of this Note, principal
and interest, immediately due and payable without any notice, and failure to
exercise said option shall not constitute a waiver on the part of Payee of the
right to exercise the same at any other time.
All past due principal and interest on this Note shall bear interest
from maturity of such principal or interest (in whatever manner same may be
brought about) until paid at the highest non-usurious rate allowed by applicable
law. To the extent such highest non-usurious interest rate chargeable hereunder
is determined by reference to the laws of the State of Texas, same shall be
determined by reference to the indicated (weekly) rate ceiling (as defined and
described in Texas Revised Civil Statutes, Article 5069-1.04, as amended) at the
applicable time in effect. In the event default is made in the payment of this
Note in whatever manner its maturity may be brought about, and it is placed in
the hands of an attorney for collection, or is collected through probate,
bankruptcy or other proceedings, Maker promises to pay all costs and reasonable
attorneys' fees incurred by Payee as a result thereof.
Maker and every surety, endorser and guarantor of this Note waive grace,
notice, demand, presentment for payment, notice of non-payment, protest, notice
of protest, notice of intention to accelerate, notice of acceleration of the
indebtedness
Page 1 of 2
<PAGE>
due hereunder and all other notice, filing of suit and diligence in collecting
this Note, and the enforcing of any of the security rights of Payee, and consent
and agree that the time of payment hereof may be extended without notice at any
time and from time to time, and for periods of time whether or not for a term or
terms in excess of the original term hereof, without notice or consideration to,
or consent from, any of them.
This Note may be prepaid, in whole or in part, at any time without
penalty.
All regular installments and any prepayment sums as received by Payee or
other holder hereof shall be applied to any indebtedness of Maker to Payee in
such order as Payee shall elect in its sole discretion.
The indebtedness evidenced by this Note is secured by a pledge and
security interest in 2105.3 shares of stock of Edge Petroleum Corporation which
has this day been delivered to Payee. Payee agrees when said Note is paid in
full to endorse such stock certificate back over to Maker.
The terms and provisions hereof shall be binding upon and inure to the
benefit of Maker and Payee and their respective successors and assigns.
EXECUTED EFFECTIVE the day and year first written above.
"Maker":
/s/ John E. Calaway
-------------------------------
John E. Calaway
CALAWAY OIL & GAS CORPORATION
By: /s/ John E. Calaway
---------------------------------
John E. Calaway, President
Page 2 of 2
<PAGE>
ADDENDUM TO JAMES C. CALAWAY - JOHN E. CALAWAY
$300,000 LOAN
The following additional terms are made a part of the loan agreement
between James C. Calaway and John E. Calaway:
1. John E. Calaway agrees to spend $30,000.00 of the loan proceeds received
from James C. Calaway in connection with the captioned loan on improvements
and furnishings for the condominium James C. Calaway is buying in Aspen,
Colorado at Southpoint Condominiums. The $30,000.00 expenditure will be
spent first on improvements and furnishings, and any excess funds will be
applied towards the purchase price of the unit. Should the improvements and
furnishings cost more than $30,000.00, James C. Calaway will pay the excess.
2. As a result of such expenditures, John E. Calaway will own an undivided
interest in such condominium, such including the improvements, furnishings
and car, (a Range Rover) equal to the fraction the numerator of which is
$30,000.00 and the denominator of which is the sum of all expenditures made
by James C. Calaway to acquire the condominium, furniture, improvements and
car. John E. Calaway will be entitled to receive a Warranty Deed for his
undivided interest in the condominium and related improvements. James C.
Calaway will retain all decision making authority concerning the building,
furnishing and decorating of the condominium, the purchase of furniture and
improvements and the purchase of the car and the ongoing maintenance of
such items. The car will be registered in the name of James C. Calaway but
John E. Calaway will own his undivided share thereof, beneficially. Except
as set forth in paragraph 4. below, each party will be liable for their
respective undivided ownership interest share of all liabilities and
obligations which arise in connection with the condominium, improvements,
furnishings and car, and each party shall indemnify and hold harmless the
other party, their successors and assigns, against any claims, losses,
liabilities or lawsuit in excess of such party's proportionate share.
3. Ongoing costs of maintenance, utilities, taxes, insurance and general upkeep
of the condominium and improvements will be borne by the parties in
accordance with their undivided ownership interest. It is anticipated that
James C. Calaway will be responsible for paying all such expenses, and John
E. Calaway will reimburse James C. Calaway on or before the 5th day of each
month for John E. Calaway's proportionate share of such costs. Each party
will be responsible for gasoline, oil, and light maintenance for the use of
the car while such party is using the same.
4. Normal wear and tear on the condominium and improvements and on the car will
be borne by the parties in proportion to their ownership interest, but any
damages or losses above normal wear and tear which are caused by a party or
their guests or invitees will be borne and paid for entirely by such party.
5. The parties agree to purchase a comprehensive liability (all perils)
homeowner's policy of insurance to cover the condominium, its use, and
occupants, with the cost of same to be paid for by the parties in proportion
to their ownership interest.
<PAGE>
Addendum to JCC-JEC $300,000 Loan
January 3, 1995
Page 2
6. Except as may otherwise be agreed between the parties, each of the parties
shall have the right to use and occupy the condominium a number of days each
year that is equal to each respective party's percentage ownership times 365
days. For example, assuming John E. Calaway is entitled to 1/14 undivided
ownership interest, he would be entitled to occupy the condominium for 26
days out of the year (365 x 1/14). James C. Calaway agrees that John E.
Calaway will have a superior right of possession to the condominium during
the week between Christmas and New Years and during any time periods when
John E. Calaway has possession of his children.
7. John E. Calaway, at his discretion, shall furnish all of the art work for
the condominium at no cost to James C. Calaway. John E. Calaway will retain
full ownership of the art work.
8. James C. Calaway IRA Account, Calaway Petroleum Interests, Inc., Southwest
Minerals or others may all participate as lenders in the loan in such
amounts as James C. Calaway shall determine.
9. This Agreement is not intended to constitute a partnership, and the parties
shall not be liable as partners, joint venturers, or associates. This
contract is intended to set forth the rights and obligations of the parties
with respect to their undivided ownership interest in the property herein
described, and their cost sharing arrangement with respect thereto.
10. The rights and obligations of the parties under this Agreement may not be
sold, transferred, mortgaged, hypothecated or otherwise encumbered without
the prior written consent of the other party. However, either party may
dispose of their interest by gift, devise or intestate succession.
AGREED TO AND ACCEPTED THIS 3RD DAY OF JANUARY, 1995
JOHN E. CALAWAY
BY: /S/ JOHN E. CALAWAY
----------------------------
NAME:
AGREED TO AND ACCEPTED THIS 3RD DAY OF JANUARY, 1995
JAMES C. CALAWAY
BY: /S/ JAMES C. CALAWAY
----------------------------
NAME:
<PAGE>
PLEDGE AND SECURITY AGREEMENT
(THIS AGREEMENT CONTAINS AN AFTER-ACQUIRED PROPERTY CLAUSE)
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") dated December 13,
1994, is made by JOHN E. CALAWAY and CALAWAY OIL & GAS CORPORATION, a Texas
corporation (collectively, the "Pledgor" or "Borrower"), to JAMES C. CALAWAY
(the "Lender").
PRELIMINARY STATEMENTS:
(1) The Pledgor, is the owner of the Stock described in Schedule 1 hereto
(the "Stock").
(2) The Lender has contemporaneously herewith entered into a Promissory
Note and Loan Agreement dated January 24, 1995 (said agreement, as it may
hereafter be amended or otherwise modified from time to time, being the "Loan
Agreement") with the Pledgor, pursuant to which Lender lent to Borrower the
principal sum of $300,000.00.
(3) Lender has requested and has the right to receive the additional
collateral described herein, and the Pledgor has determined that it is in the
best interests of the Pledgor to execute, deliver and perform this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Lender to enter into the Loan Agreement and the agreements and concessions made
to Pledgor therein, the Pledgor hereby agrees as follows:
SECTION 1. Defined Terms and Related Matters.
(a) The capitalized terms used herein which are defined in the Loan
Agreement and not otherwise defined herein shall have the meanings
specified in the Loan Agreement.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement.
(c) Unless otherwise defined herein or in the Loan Agreement, the
terms defined in Chapters 8 and 9 of the Connecticut Uniform Commercial
Code is currently in effect as used herein as therein defined.
SECTION 2. Pledge. The Pledgor hereby pledges to the Lender, and grants to
the Lender a continuing first lien and security interest in, the following (the
"Pledged Collateral"):
(i) the Stock and all rights to receive dividends, income,
distributions and other property from time to time received,
receivable or otherwise distributed or distributable in respect of,
attributable to or in exchange for, the Stock;
<PAGE>
(ii) all proceeds received on the sale of any of the foregoing.
The inclusion of proceeds in this Agreement does not authorize the Pledgor
to sell, dispose of or otherwise use the Pledged Collateral in any manner not
specifically authorized hereby.
SECTION 3. Security for Obligations. This Agreement secures the prompt and
complete (a) payment of all obligations of the Pledgor to the Lender now or
hereafter existing under the Note, as amended, as described in the Loan
Agreement (the "Obligation"). This Security Agreement shall not secure any other
amounts due Lender under the Loan Agreement or otherwise.
SECTION 4. Delivery of Pledged Collateral. In order to effectuate the
security interest of Lender, Borrower will deliver the Stock to Lender to hold
pursuant to the terms and provisions hereof. Upon full payment of the
Obligation, Lender will deliver the Stock back to Borrower endorsed in
accordance with Borrower's instructions.
SECTION 5. Representations and Warranties.
(a) The representations and warranties in the Loan Agreement are true
and correct.
(b) Except as set forth in Schedule 1 hereto, the Pledgor is the legal
and beneficial owner of the Pledged Collateral free and clear of any lien,
security interest, option or other charge or encumbrance except for the
security interest created by this Agreement. Pledgor has not sold,
transferred, assigned or disposed of any part of the Pledged Collateral.
Pledgor owns the interests in the Pledged Collateral set forth in Schedule
1 attached hereto.
(c) Except as set forth in Schedule 1 hereto, the Lender has a valid
and perfected priority security interest in the Pledged Collateral,
securing payment of the Obligations.
SECTION 6. Further Assurances. The Pledgor agrees that from time to time,
at the expense of the Pledgor, the Pledgor will promptly execute and deliver all
further instruments and documents, and take all further action that may be
necessary or desirable, or that the Lender may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Lender to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral.
SECTION 7. Rights to Receive Income. (a) So long as no Default or an Event
of Default shall have occurred and be continuing:
(i) Pledgor shall be entitled to receive and retain dividends,
income and distributions paid in respect of the Pledged Collateral,
provided, however, that any such payments paid to Pledgor in
contravention of the Note, Loan Agreement
-2-
<PAGE>
or the Pledge and Security Agreement, shall be, and shall be forthwith
delivered to the Lender to hold as, Pledged Collateral and shall, if
received by the Pledgor, be received in trust for the benefit of the
Lender, be segregated from the other property in trust for benefit of
the Lender, and be forthwith delivered to the Lender as Pledged
Collateral in the same form as so received (with any necessary
endorsement).
(b) Upon the occurrence and during the continuance of default which is
not cured within the applicable cure period provided for in Paragraph 6.1
of the Loan Agreement,
(i) All rights of the Pledgor to receive the dividends, income
and distributions which it would otherwise be entitled to receive and
retain pursuant to Section 7(a)(i) shall cease and the Lender shall
have the sole right to receive and hold as Pledged Collateral all
subsequent dividends, income and payments attributable to the Pledged
Collateral up to the amount due Lender under this Note with any
balance to Pledgor.
(ii) All dividends, income, payments and distributions which are
received by the Pledgor contrary to the provisions of Paragraph (i) of
Section 7(b) shall be received in trust for the benefit of the Lender,
shall be segregated from other funds of the Pledgor and shall be
forthwith paid over to the Lender as Pledged Collateral in the same
form as so received (with any necessary endorsement).
SECTION 8. Transfers and Other Liens.
(a) The Pledgor shall not (i) sell, assign (by agreement, operation
of law or otherwise), dispose of, or grant any option with respect to, any
of the Pledged Collateral, or (ii) create or permit to exist any lien,
security interest or encumbrance upon or with respect to any of the Pledged
Collateral which would be prior to the security interest created by this
Agreement.
SECTION 9. Lenders May Perform. If the Pledgor fails to perform any
agreement contained herein or in the Loan Agreement, the Lender itself may
perform, or cause performance of, such agreement, and the expenses of the Lender
incurred in connection therewith shall be payable by Pledgor under Section 12
hereof.
SECTION 10. The Lender's Duties. The powers conferred on the Lender
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for reasonable
care in the custody of any Pledged Collateral in its possession and the
accounting for moneys actually received by it hereunder, the Lender shall have
no duty as to any Pledged Collateral or as to the taking of any necessary steps
to preserve rights against prior parties or any other rights pertaining to any
Pledged Collateral. The Lender shall be deemed to have exercised reasonable care
in the custody and preservation of the Pledged Collateral in its possession if
the Pledged Collateral is accorded treatment
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<PAGE>
substantially equal to that which the Lender accords its own property, it being
understood that the Lender shall not have any responsibility for (i)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Pledged Collateral, whether
or not the Lender has or is deemed to have knowledge of such matters, or (ii)
taking any necessary steps to preserve rights against any parties with respect
to any Pledged Collateral.
SECTION 11. Remedies Upon Uncured Default. If any Event of Default shall
become an Uncured Default:
(a) The Lender may exercise in respect of the Pledged Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the Uniform Commercial Code of the state whose laws are applicable to
this transaction at the time (the "Code") (whether or not the Code applied
to the affected Pledged Collateral), and the Lenders may also, without
notice except as specified below, sell the Pledged Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange,
broker's board or at any of the Lender's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the Lender may
deem commercially reasonable, without recourse to judicial proceedings and
without demand for payment, appraisement or advertisement of any kind, all
of which the Pledgor waives. The Pledgor agrees to give at least ten (10)
days' notice to the Pledgor of the time and place of any public sale or the
time after which any private sale is to be made and such notice shall
constitute reasonable notification. The Lender shall be obligated to make
any sale of Pledged Collateral regardless of notice of sale having been
given. The Lender may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) Any cash held by the Lender as Pledged Collateral and all cash
proceeds received by the Lender in respect of any sale of, collection from,
or other realization upon all or any part of the Pledged Collateral may, in
the sole discretion of the Lender, be held by the Lender as collateral for,
and/or then or at any time thereafter applied (after payment of any amounts
payable to the Lender pursuant to Section 12 hereof) in whole or in part by
the Lender against, all or any part of the Obligations in such order as the
Lender shall elect. Any surplus of such cash or cash proceeds held by the
Lender and remaining after payment in full of all the Obligations shall be
paid over to the Pledgor or to whomsoever may be lawfully entitled to
receive such surplus.
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<PAGE>
(c) In connection with the sale of any Pledged Collateral, the Lender
is authorized, but not obligated, to limit prospective purchases to the
extent deemed necessary or desirable by the Lender to render such sale
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and any applicable state securities laws
and regulations, and no sale so made in good faith by the Lender shall be
deemed not to be "commercially reasonable" because so made.
(d) All rights and remedies of the Lender expressed herein are in
addition to all other rights and remedies possessed by the Lender in the
Note, Loan Agreement and any other agreement or instrument relating to the
Obligations.
SECTION 12. Indemnity and Expenses.
(a) The Pledgor hereby indemnifies the Lender from and against any and
all claims, losses and liabilities growing out of or resulting from this
Agreement (including, without limitation, enforcement of the Agreement),
except claims, losses or liabilities resulting from the Lender's gross
negligence or willful misconduct. It is the express intention of the
Pledgor that the Lender shall be indemnified and held harmless against any
and all losses, liabilities, claims, deficiencies, judgments or expenses
arising out of or resulting from the ordinary negligence of the Lender.
(b) After an Uncured Event of Default, the Pledgor will upon demand
pay to the Lender the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel and of any experts and
agents, that the Lender may incur in connection with foreclosing the
Security Agreement. Otherwise, Lender will bear his own legal fees in
connection with this Note, Security Agreement and Loan Agreement.
SECTION 13. Amendments, etc. No amendment or waiver of any provision of
this Agreement, nor consent to any departure by the Pledgor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Lender, and then such waiver or consent shall be effective only in the specific
instance for the specific purpose for which given.
SECTION 14. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and if to the Pledgor, mailed or telecopied or delivered to it, addressed to it
at 1111 Bagby, Suite 2100, Houston, Texas 77002, ATTENTION: JOHN E. CALAWAY, if
to the Lender, mailed or delivered to it, addressed to it at the address of the
Lender specified in the Loan Agreement or as to either party at such other
address as shall be designated by such party in a written notice to each other
party complying as to delivery with the terms of this Section. All such notices
and other communications shall, when mailed or telegraphed, respectively, be
effective three days after deposit in the mails or delivered to the telegraph
company, respectively, addressed as aforesaid, return receipt requested, or
accompanied by some other proof of transmission. All such notices and other
communications shall when hand delivered or faxed be effective upon receipt.
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<PAGE>
SECTION 15. Waiver of Marshalling. All rights of marshalling of assets of
the Pledgor, including any such right with respect to the Pledged Collateral,
are, to the extent permitted by applicable law, hereby waived by the Pledgor.
SECTION 16. Limitation By Law. All rights, remedies and powers provided in
this Agreement, the Loan Agreement and any note or other document executed
pursuant thereto may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all the provisions of the
Agreement are intended to be subject to all applicable mandatory provisions of
law which may be controlling and to be limited to the extent necessary so that
they will not render this Agreement invalid, unenforceable, in whole or in part,
or not entitled to be recorded, registered or filed under the provisions of any
applicable laws.
SECTION 17. Severability. Should any clause, sentence, paragraph,
subsection or Section of this Agreement be judicially declared to be invalid,
unenforceable or void, such decision will not have the effect of invalidating or
voiding the remainder of this Agreement, and the parties hereto agree that the
part or parts of this Agreement so held to be invalid, unenforceable or void
will be deemed to have been stricken herefrom by the parties hereto, and the
remainder of this Agreement will have the same force and effectiveness as if
such stricken part or parts had never been included herein.
SECTION 18. Captions. The captions in this Agreement have been inserted for
convenience only and shall be given no substantive meaning or significance
whatever in construing the terms and provisions of this Agreement.
SECTION 19. No Waiver: Remedies. No failure on the part of the Lender to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 20. Continuing Security Interest; Transfer of Note. This Agreement
shall create a continuing security interest in the Pledged Collateral and any
after-acquired property of Pledgor included in the description of Pledged
Collateral and shall (i) remain in full force and effect until payment in full
of the Obligation, (ii) be binding upon the Pledgor, its successors and assigns,
and (iii) inure to the benefit of the Lender and their successors, transferees
and assigns. Without limiting the generality of the foregoing clause (iii) the
Lender may assign or otherwise transfer all or a portion of any of the Note to
any other Person, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted to the Lender herein or otherwise. Upon
the payment in full of the Obligation, the Pledgor shall be entitled to return,
upon its request and at its expense, of such of the Pledged Collateral as shall
not have been sold or otherwise applied against the Obligation pursuant to the
terms hereof.
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<PAGE>
SECTION 21. Survival of Representations and Warranties. All representations
and warranties contained in this Agreement are made in writing by or on behalf
of the Pledgor in connection herewith shall terminate as shall this Agreement
when all amounts due under the Note have been paid in full.
SECTION 22. Security Interest Absolute. All rights of the Lender and
security interest hereunder and all obligations of the Pledgor hereunder, shall
be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Loan Agreement, the
Note, any other loan document or any other agreement or instrument relating
thereto;
(ii) any change in the time, manner or place of payment of, or in any
other times of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Loan Agreement or the
Note;
(iii) any exchange, release or non-perfection of any collateral, or
any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Obligations; or
(iv) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Pledgor or a third party pledgor.
SECTION 23. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Texas, except as required
by mandatory provisions of law and except to the extent that the validity or
perfection of the security interest hereunder or remedies hereunder, in respect
of any particular Pledged Collateral are governed by the Laws of a jurisdiction
other than the State of Texas.
IN WITNESS WHEREOF, the Pledgor has caused this agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
PLEDGOR
By: /s/ JOHN E. CALAWAY
--------------------------------
JOHN E. CALAWAY
CALAWAY OIL & GAS CORPORATION
By: /s/ JOHN E. CALAWAY
--------------------------------
NAME: John E. Calaway
TITLE: President
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<PAGE>
THE STATE OF TEXAS
COUNTY OF HARRIS
Before me, a Notary Public, on this day personally appeared JOHN E. CALAWAY
known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he executed the same for the purposes and
consideration therein expressed.
Given under my hand and seal of this office this 19th day of December,
1994.
My Commission Expires: /s/ JOAN B. ROBISON
1-22-96 -----------------------
NAME: JOAN B. ROBISON
NOTARY PUBLIC
Comm. Exp. 01-22-96
THE STATE OF TEXAS
COUNTY OF HARRIS
Before me, a Notary Public, on this day personally appeared JOHN E. CALAWAY
known to me to be the person and officer whose name is subscribed to the
foregoing instrument and acknowledged to me that the same was the act of the
said CALAWAY OIL & GAS CORPORATION, a Texas corporation, and that he has
executed the same as the act of such corporation for the purposes and
consideration therein expressed, and in the capacity therein stated.
Given under my hand and seal of this office this 19th day of December,
1994.
My Commission Expires: /s/ JOAN B. ROBISON
1-22-96 -----------------------
NAME: JOAN B. ROBISON
NOTARY PUBLIC
Comm. Exp. 01-22-96
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<PAGE>
SCHEDULE 1.
All of the interest of Pledgor in and to the following:
2105.3 shares of stock of Edge Petroleum Corporation.
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<PAGE>
EXHIBIT H
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f) of the Securities Exchange Act of
1934, as amended, the undersigned agree to the joint filing on behalf of each of
them of a Statement on Schedule 13D (including any and all amendments thereto)
with respect to the Common Stock, par value $0.01 per share, of Edge Petroleum
Corporation, a Delaware corporation, and further agree that this Agreement shall
be included as an Exhibit to such joint filings.
The undersigned further agree that each party hereto is responsible
for timely filing of such Statement on Schedule 13D and any amendments thereto,
and for the completeness and accuracy of the information concerning such party
contained therein; provided that no party is responsible for the completeness or
accuracy of the information concerning the other party, unless such party knows
or has reason to believe that such information is inaccurate.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original instrument, but all of such counterparts
together shall constitute but one agreement.
In evidence thereof the undersigned, being duly authorized, hereby
execute this Agreement this 13th day of March, 1997.
/s/ John E. Calaway
---------------------------------
John E. Calaway
CALAWAY OIL AND GAS CORPORATION
By:/s/ John E. Calaway
------------------------------
John E. Calaway
President and Secretary
<PAGE>
CALAWAY PARTNERS, by CALAWAY OIL AND
GAS CORPORATION, its general partner
By:/s/ John E. Calaway
-------------------------------
John E. Calaway
President and Secretary
/s/ Nell G. Calaway
----------------------------------
Nell G. Calaway
