<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Edge Petroleum Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LETTERHEAD]
April 9, 1999
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders to
be held at the Doubletree Hotel, 400 Dallas Street, Houston, Texas 77002, on
Tuesday, May 11, 1999 at 10:00 a.m. For those of you who cannot be present at
this annual meeting, we urge that you participate by indicating your choices on
the enclosed proxy and completing and returning it at your earliest convenience.
This booklet includes the notice of the meeting and the proxy statement,
which contains information about the Board and its committees and personal
information about each of the nominees for the Board. Other matters on which
action is expected to be taken during the meeting are also described.
It is important that your shares are represented at the meeting, whether or
not you are able to attend personally. Accordingly, you are requested to sign,
date and mail promptly the enclosed proxy in the envelope provided.
On behalf of the Board of Directors, thank you for your continued support.
/s/ John W. Elias
John W. Elias
Chairman of the Board
and Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 11, 1999
To the Stockholders of
Edge Petroleum Corporation
The annual meeting of stockholders of Edge Petroleum Corporation will be
held at the Double Tree Hotel, 400 Dallas Street, Houston, Texas 77002, on
Tuesday, May 11, 1999 at 10:00 a.m., Houston time, for the following purposes:
1. To elect three directors.
2. To approve the appointment of Deloitte & Touche LLP as independent
public accountants for 1999.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 5, 1999 as
the record date for determining stockholders entitled to notice of and to vote
at the meeting.
You are cordially invited to attend the meeting in person. Even if you
plan to attend the meeting, however, you are requested to mark, sign, date and
return the accompanying proxy as soon as possible.
By Authorization of the Board of Directors
/s/ Robert C. Thomas
Robert C. Thomas
General Counsel and
Corporate Secretary
April 9, 1999
1111 Bagby, Suite 2100
Houston, Texas 77002
<PAGE>
PROXY STATEMENT
This Proxy Statement and the accompanying proxy card are being mailed to
stockholders beginning on or about April 9, 1999. They are furnished in
connection with the solicitation by the Board of Directors of Edge Petroleum
Corporation (the "Company") of proxies from the holders of the Company's common
stock ("Common Stock") for use at the 1999 annual meeting of stockholders to be
held at the time and place and for the purposes set forth in the accompanying
notice. In addition to the solicitation of proxies by mail, proxies may also be
solicited by telephone, telegram or personal interview by regular employees of
the Company. The Company will pay all costs of soliciting proxies. The Company
will also reimburse brokers or other persons holding stock in their names or in
the names of their nominees for their reasonable expenses in forwarding proxy
material to beneficial owners of such stock.
All duly executed proxies received prior to the meeting will be voted in
accordance with the choices specified thereon. As to any matter for which no
choice has been specified in a duly executed proxy, the shares represented
thereby will be voted FOR the election as directors of the nominees listed
herein, FOR approval of the appointment of Deloitte & Touche LLP as the
Company's independent public accountants, and at the discretion of the persons
named in the proxy in connection with any other business that may properly come
before the annual meeting. A stockholder giving a proxy may revoke it at any
time before it is voted at the annual meeting by filing with the Corporate
Secretary an instrument revoking it, by delivering a duly executed proxy bearing
a later date or by appearing at the annual meeting and voting in person.
As of April 5, 1999, the record date for determining stockholders entitled
to vote at the annual meeting, the Company had outstanding and entitled to vote
7,772,032 shares of Common Stock. The Common Stock is the only class of stock
of the Company outstanding at the record date and entitled to vote at the Annual
Meeting. Each share entitles the holder to one vote on each matter submitted to
a vote of stockholders. Cumulative voting is not permitted. The requirement
for a quorum at the annual meeting is the presence in person or by proxy of
holders of a majority of the outstanding shares of Common Stock.
Abstentions, shares with respect to which authority is withheld, and shares
held of record by a broker or its nominee that are voted on any matter are
included in determining whether a quorum is present. Abstentions are treated as
shares that are present and entitled to vote for purposes of determining the
outcome of any matter submitted to the stockholders for a vote. Abstentions,
however, do not constitute a vote "for" or "against" any matter and thus will be
disregarded in the calculation of a plurality or of "votes cast." For purposes
of determining the outcome of any matter as to which the broker has physically
indicated on the proxy that it does not have discretionary authority to vote,
those shares will be treated as not present and not entitled to vote with
respect to that matter (even though those shares are considered entitled to vote
for quorum purposes and may be entitled to vote on other matters). Votes are
counted, and the count is certified, by an inspector of elections. Information
regarding the vote required for approval of particular matters is set forth in
the discussion of those matters appearing elsewhere in this Proxy Statement.
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<PAGE>
The Annual Report to Stockholders, which includes financial statements of
the Company for the year ended December 31, 1998, has been mailed to all
stockholders entitled to vote at the Annual Meeting on or before the date of
mailing this Proxy Statement. The Annual Report is not a part of the proxy
solicitation material.
I. ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with
staggered terms of office, ending in 1999, 2000 and 2001, respectively.
Thereafter, the term for each class will expire on the date of the third annual
stockholders' meeting for the election of directors following the most recent
election of directors for such class. Each director holds the office until the
next annual meeting of stockholders for the election of directors of his class
and until his successor has been duly elected and qualified.
Three directors are to be elected to the class of directors whose term will
end in 2002. The names of Mr. Vincent S. Andrews, Mr. David B. Benedict and Mr.
Nils P. Peterson will be placed in nomination, and the persons named in the
proxy will vote in favor of such nominees unless authority to vote in the
election of directors is withheld. Messrs. Andrews, Benedict and Peterson are
currently directors of the Company.
The persons named in the proxy may act with discretionary authority in the
event any nominee should become unavailable for election, although management is
not currently aware of any circumstances likely to result in a nominee becoming
unavailable for election. In accordance with the Company's Bylaws, the three
directors will be elected by a plurality of the votes cast; accordingly,
abstentions and broker non-votes will have no effect. A stockholder may, in the
manner set forth in the enclosed proxy card, instruct the proxy holder not to
vote that stockholder's shares for one or more of the named nominees.
NOMINEES - The following summaries set forth information concerning the
three nominees for election as directors at the Annual Meeting, including each
nominee's age, position with the Company, if any, and business experience during
the past five years.
VINCENT S. ANDREWS has served as a director of the Company since December
1996 and served as a director of the Company's corporate predecessor from April
1991 until the Company's initial public offering in March 1997 (the "Offering").
Mr. Andrews has been an active investor in the Company's corporate predecessor
since 1988. Mr. Andrews has, for more than five years, served as President of
Vincent Andrews Management Corporation, a privately held management company
primarily involved in personal financial management. Mr. Andrews is a member
(chairman) of the Compensation Committee of the Board. He is 58 years old.
DAVID B. BENEDICT has served as a director of the Company since December
1996, served as a director of the Company's corporate predecessor from March
1995 until the Offering, and was an active investor in the Company's corporate
predecessor since 1983. Since 1987, Mr. Benedict has served as Managing
Director of Capital Markets for First Albany Corporation, an investment banking
and brokerage firm. Prior thereto, he served in various capacities with other
investment banking firms, including Dillon Read & Company, Bear Stearns
Companies Inc. and Oppenheimer Capital L.P. Mr. Benedict is a member of the
Compensation Committee of the Board. He is 59 years old.
2
<PAGE>
NILS P. PETERSON has served as a director of the Company since December
1996 and served as a director of the Company's corporate predecessor from March
1995 until the Offering. Since January 1991 he has been primarily engaged as a
private investor and serves as a director of Eastern Bancorp, Inc. and the
Boston Mutual Life Insurance Co. Prior thereto, he was Chief Investment Officer
of the Harvard Management Company, investment manager of the Harvard University
endowment funds. Mr. Peterson is a member of the Audit Committee of the Board.
He is 62 years old.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION
OF MESSRS. ANDREWS, BENEDICT AND PETERSON AS DIRECTORS OF THE COMPANY.
DIRECTORS WITH TERMS EXPIRING IN 2000 AND 2001 - The following summaries
set forth information concerning six directors of the Company whose present
terms of office will continue until 2000 or 2001, including each director's age,
position with the Company, if any, and business experience during the past five
years.
JOHN W. ELIAS has served as the Chief Executive Officer and Chairman of the
Board of the Company since November 1998. From April 1993 to September 1998, he
served in various senior management positions, including Executive Vice
President, of Seagull Energy Corporation, a company engaged in oil and gas
exploration, development and production and pipeline marketing. Prior to April,
1993 Mr. Elias served in various positions, including senior management
positions, with Amoco Corporation, a major integrated oil and gas company. Mr.
Elias has more than 35 years of experience in the oil and natural gas
exploration and production business. Mr. Elias is a member of the Nominating
Committee of the Board. He is 58 years old. Mr. Elias' current term as a
director of the Company expires in 2000.
JAMES D. CALAWAY has served as the President (and effective March 1999 as
President and Chief Operating Officer) and a director of the Company since
December 1996 and prior to that served as a director of the Company's corporate
predecessor from April 1991 until the Offering. From January 1994 to March
1997, he served as Special Advisor to the Company's corporate predecessor. From
1989 to January 1994, Mr. Calaway was primarily engaged in the organization and
capitalization of several high technology companies, including The Forefront
Group, Inc. Prior thereto, he served as Vice President of Business Development
for Space Industries International, Inc., a company he co-founded in 1982 that
develops, fabricates, integrates and operates spacecraft and spaceflight
equipment. Mr. Calaway is a member of the Nominating Committee of the Board.
He is 41 years old. Mr. Calaway's current term as a director of the Company
expires in 2000.
JOHN SFONDRINI has served as a director of the Company since December 1996
and prior to that served as a director of the Company's corporate predecessors
from 1986, when he arranged for the capitalization of a predecessor partnership.
For more than five years he has managed various general and limited partnerships
that invest primarily in the oil and natural gas industry. Mr. Sfondrini is a
member of the Compensation and Nominating (chairman) Committees of the Board.
He is 49 years old. Mr. Sfondrini's current term as a director of the Company
expires in 2000.
STANLEY S. RAPHAEL has served as a director of the Company since December
1996 and prior to that served as a director of the Company's corporate
predecessor from April 1991 until the Offering. For more than five years, Mr.
Raphael has been primarily engaged as a management consultant and is presently a
director of American Polymers Inc., a polystyrene manufacturer, Big City Bagels,
Inc., a
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<PAGE>
publicly held bagel store franchisor, and Trade Consultants, Inc., a
management consulting firm. Previously, he was active in trading crude oil,
petroleum products, LPG, petrochemicals, and plastics worldwide. Mr. Raphael
is a member of the Audit Committee of the Board. He is 63 years old. Mr.
Raphael's current term as a director of the Company expires in 2001.
ROBERT W. SHOWER has served as a director of the Company since March 1997.
From December 1993 until his retirement in April 1996, Mr. Shower served as
Executive Vice President and Chief Financial Officer of Seagull Energy
Corporation, a company engaged in oil and gas exploration, development and
production and pipeline marketing. From March 1992 to December 1993, he served
as such company's Senior Vice President and Chief Financial Officer. From 1991
to 1992, Mr. Shower served as Senior Vice President, Corporate Development for
Albert Fisher, Inc., a company engaged in produce distribution. Prior thereto,
he served as Senior Vice President and Chief Financial Officer of Ameriserv.
Mr. Shower also serves as a director of Lear Corporation, Highlands Insurance
Group, Inc., Breed Technologies, Inc. and Nuevo Energy Company. Mr. Shower is a
member of the Compensation and Audit (chairman) Committees of the Board. He is
61 years old. Mr. Shower's current term as a director of the Company expires in
2001.
WILLIAM H. WHITE has served as a director of the Company since 1998 and the
president and chief executive officer of WEDGE Group Incorporated, the parent of
a group of organizations engaged in engineering, hotels, and commercial real
estate development since April 1997. Mr. White founded and has been the
chairman of the board of Frontera Resources Corporation and its predecessor
("Frontera"), a privately held international energy company, since December
1995. He also served as the President and Chief Executive Officer of Frontera
from December 1995 through April 1996. Mr. White served as deputy secretary and
chief operating officer of the United States Department of Energy from June 1993
to August 1995. Before joining the Department of Energy, Mr. White was a
partner in the Houston, Texas, law firm of Susman Godfrey L.L.P. Mr. White
serves on the Board of United States Enrichment Corporation, a global energy
concern, and the North American Electrical Reliability Organization, a
non-profit trade organization. His civic activities have included the
chairmanship of the Houston World Affairs Council, membership on the National
Petroleum Council. Mr. White is a member of the Nominating Committee of the
Board. He is 44 years old. Mr. White's term as a director of the Company
expires in 2001.
There are no family relations, of first cousin or closer, among the
Company's directors or executive officers by blood, marriage or adoption.
STANDING COMMITTEES, BOARD ORGANIZATION AND MEETINGS - The members of the
Compensation Committee of the Board are Messrs. Andrews (Chairman), Benedict,
Shower and Sfondrini. The duties and functions performed by the Compensation
Committee are (a) to review and recommend to the Board of Directors, or
determine, the annual salary, bonus, stock options and other benefits, direct
and indirect, of the executive officers; (b) review new executive compensation
programs, review expense accounts of executive officers, review on a periodic
basis the operation of the Company's executive compensation programs to
determine whether they are properly coordinated, establish and periodically
review policies for the administration of executive compensation programs, and
take steps, consistent with the contractual obligations of the Company, to
modify any executive compensation programs that yield payments and benefits that
are not reasonably related to executive performance; (c) establish and
periodically review policies in the area of management prerequisites; and (d) to
exercise all of the powers of the Board of Directors with respect to any other
matters involving the compensation of
4
<PAGE>
employees and the employee benefits of the Company as may be delegated to the
Compensation Committee from time to time.
The members of the Audit Committee of the Board are Messrs. Shower
(chairman), Raphael and Peterson. The Audit Committee reviews on an annual
basis, or more frequently as such Committee may from time to time deem
appropriate, the policies and practices of the Company dealing with various
matters relating to the financial condition and auditing procedures of the
Company, including financial information to be provided to shareholders and
others, the Company's systems of internal control which management and the Board
have established and oversight of the annual audit and review of the audit, as
well as any duties that may be assigned by the Board of Directors from time to
time.
The members of the Nominating Committee of the Board are Messrs. Sfondrini
(Chairman), Calaway, Elias and White. The functions performed by the Nominating
Committee are to make non-binding recommendations with respect to the nomination
of directors to serve on the Board of Directors of the Company for the Board's
final determination and approval, and any other duties that may be assigned by
the Board from time to time. Stockholders of the Company who wish to nominate
persons for election to the Board of Directors must comply with the provisions
of the Bylaws that are described more fully under "Additional Information".
During 1998, the Board of Directors held seven meetings and acted by
written consent one time. During 1998, the Compensation Committee met two
times, the Audit Committee met four times and the Nominating Committee met one
time. During 1998, all members of the Board of Directors attended at least 75%
of the total of all Board meetings and applicable committee meetings.
DIRECTOR REMUNERATION - Each director who is not an employee of the Company
or a subsidiary (a "Non-employee Director") receives, subject to attending a
minimum of three Board meetings per year, an annual retainer of $10,000 paid 50%
in cash and 50% in shares of restricted Common Stock (the "Director Restricted
Stock") pursuant to the Edge Petroleum Corporation 1997 Incentive Plan (the
"Incentive Plan"). The Director Restricted Stock will vest ratably, subject to
continued service as a director, over three years beginning on the first
anniversary of the date of grant. Each Non-employee Director receives a $1,000
cash payment for in-person attendance at a meeting of the Board of Directors
($400 if such attendance is telephonic) and $400 for each meeting of a Committee
of the Board of Directors attended (whether in-person or telephonic). All
directors are reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board or Board committees and for other expenses incurred in
their capacity as directors.
Non-employee Directors also receive annual grants of options for the
purchase of Common Stock pursuant to the Incentive Plan. On the first business
day following the date on which each annual meeting of the Company's
stockholders is held, each Non-employee Director then serving automatically is
granted non-qualified stock options ("NSOs") to purchase 3,000 shares of Common
Stock; accordingly, each Non-employee Director received such NSOs following the
Company's 1998 annual meeting. Upon his or her initial election, a Non-employee
Director automatically is granted NSOs to purchase 5,000 shares of Common Stock.
Pursuant thereto, Mr. White was granted NSOs to purchase 5,000 shares of Common
Stock. Each NSO granted to a Non-employee Director (i) has a ten year term,
(ii) an exercise price per share equal to the fair market value of a Common
Stock share on the date of grant and (iii) becomes exercisable in cumulative
annual increments of one-third of the total number of
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<PAGE>
shares of Common Stock subject thereto, beginning on the first anniversary of
the date of grant. If a Non-employee Director resigns from the Board without
the consent of a majority of the other directors, such director's NSOs may be
exercised only to the extent they were exercisable on the resignation date.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - The
following table sets forth information as of March 11, 1999 (except as indicated
below) with respect to beneficial ownership of the Common Stock by: (i) all
persons who are the beneficial owner of 5% or more of the outstanding Common
Stock; (ii) each director or nominee for director; (iii) each executive officer
of the Company; and (iv) all executive officers and directors of the Company as
a group.
<TABLE>
<CAPTION>
NAME(1) NUMBER OF SHARES OF PERCENT OF COMMON STOCK
COMMON STOCK BENEFICIALLY OWNED
BENEFICIALLY OWNED
- --------------------------------------------------------------------------------
<S> <C> <C>
John W. Elias(2) 86,667 1.10
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James D. Calaway(3) 364,110 4.63
- --------------------------------------------------------------------------------
Michael G. Long(4) 24,553 *
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Brian Baumler (5) 2,037 *
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Vincent Andrews(6) 23,031 *
- --------------------------------------------------------------------------------
David B. Benedict(7) 47,162 *
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Nils Peterson(8) 38,559 *
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Stanley S. Raphael(9) 247,424 3.18
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John Sfondrini(10) 516,389 6.64
- --------------------------------------------------------------------------------
Robert W. Shower(11) 8,736 *
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William H. White -0- ---
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Lord, Abbett & Co.(12) 1,055,805 13.58
767 Fifth Avenue
New York, New York
10153
- --------------------------------------------------------------------------------
All directors and 1,358,668 17.04
executive officers as a
group (11 persons) (13)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
* LESS THAN ONE PERCENT.
(1) Except as otherwise noted, each stockholder has sole voting and investment
power with respect to the shares beneficially owned, subject to community
property laws, where applicable.
(2) Shares shown include 66,667 shares of Common Stock that could be acquired
pursuant to stock options exercisable within 60 days of March 11, 1999.
(3) Shares shown include (i) 118,366 shares of Common Stock held by KPC
Interests, Inc., a company owned by Mr. James D. Calaway, (ii) 95,698
shares of Common Stock that could be acquired pursuant to stock options
exercisable within 60 days of March 11, 1999, (iii) 4,703
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shares owned by Mr. James D. Calaway and his wife, and (iv) 116,940 shares
of vested and unvested restricted Common Stock.
(4) Shares shown include (i) 14,202 shares of Common Stock that could be
acquired pursuant to stock options exercisable within 60 days of March 11,
1999 and (ii) 1,851 shares of vested and unvested restricted Common Stock.
(5) Shares shown include (i) 1,667 shares of Common Stock that could be
acquired pursuant to stock options exercisable within 60 days of March 11,
1999 and (ii) 370 shares of vested and unvested restricted Common Stock.
(6) Shares shown include (i) 13,155 shares of Common Stock beneficially owned
by Mr. Andrews' wife, (ii) 3,000 shares held by Mr. Andrew's children,
(iii) 5,334 shares that could be acquired pursuant to stock options
exercisable within 60 days of March 11, 1999 and (iv) 402 shares of
unvested restricted Common Stock. Mr. Andrews may be deemed the beneficial
owner of the shares of Common Stock beneficially owned by his wife and
children. Mr. Andrews disclaims such beneficial ownership.
(7) Shares shown include (i) 1,334 shares of Common Stock that could be
acquired pursuant to stock options exercisable within 60 days of March 11,
1999 and (ii) 402 shares of unvested restricted Common Stock.
(8) Shares shown include (i) 1,334 shares of Common Stock that could be
acquired pursuant to stock options exercisable within 60 days of March 11,
1999 and (ii) 402 shares of unvested restricted Common Stock.
(9) Shares shown include (i) 98,278 shares of Common Stock held by the Trade
Consultants, Inc. Pension Plan, of which Mr. Raphael is the trustee, (ii)
42,984 shares of Common Stock held by Mr. Raphael's wife, (iii) 92,935
shares held by the Stanley Raphael Trust, a trust controlled by Mr.
Raphael, (iv) 3,243 shares held by a trust for the benefit of Mr. Raphael's
wife, (v) 5,334 shares of Common Stock that could be acquired through stock
options exercisable within 60 days of March 11, 1999 and (vi) 402 shares of
unvested restricted Common Stock. Mr. Raphael may be deemed the beneficial
owner of shares of Common Stock held by Trade Consultants, Inc. Pension
Plan, his wife's trust and his wife. Mr. Raphael disclaims such beneficial
ownership.
(10) Shares shown include (i) 16,631 shares of Common Stock held by Edge Holding
Company, a limited partnership of which Mr. Sfondrini and a corporation
wholly owned by him are the general partners, (ii) 42,896 shares of stock
held by Edge Group, whose partners are certain limited partnerships, each
of which Mr. Sfondrini and a corporation wholly owned by him are the
general partners of, (iii) 4,998 shares held by Mr. Sfondrini's children,
(iv) 53,980 shares held by Napamco Ltd. (CT) and Napamco Ltd. (NY),
corporations wholly owned by Mr. Sfondrini, (v) 5,334 shares that could be
acquired pursuant to stock options exercisable within 60 days of March
11, 1999 and (vi) 402 shares of unvested restricted Common Stock.
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<PAGE>
Mr. Sfondrini may be deemed the beneficial owner of the shares held by
Napamco Ltd. (CT), Napamco Ltd. (NY), Edge Holding Company, Edge Group and
his children. Mr. Sfondrini disclaims such beneficial ownership. Mr.
Sfondrini's address is c/o Edge Holding Company, 36 Catoonah St., #16,
Ridgefield, Connecticut 06877.
(11) Shares shown represent (i) 3,334 shares of Common Stock that may be
acquired pursuant to stock options exercisable within 60 days of March 11,
1999, (ii) 5,000 shares held by Mr. Shower and his spouse, and 402 shares
of unvested restricted Common Stock.
(12) The information regarding Lord, Abbett & Co. is based on filings made with
the Securities and Exchange Commission (the "SEC") reflecting ownership of
Common Stock as of December 31, 1998.
(13) Shares shown include 200,238 shares of Common Stock that may be acquired
pursuant to stock options exercisable within 60 days of March 11, 1999.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT - Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the
Company's directors, executive officers and persons who beneficially own 10% or
more of the Company's Common Stock to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock. Based solely on
a review of the copies of such reports furnished to the Company and written
representations that no other reports were required, the Company believes that
during 1998 all its directors and executive officers and 10% or greater holders
complied on a timely basis with all applicable filing requirements under Section
16(a) of the Exchange Act, except that one transaction was reported late on a
Form 4 by Edge Holding Company Partnership; one transaction was reported late on
a Form 4 by Napamco Ltd. (a New York corporation); one transaction was reported
late on a Form 4 by Napamco Ltd. (a Connecticut corporation); 24 transactions
were reported late by Mr. Sfondrini on Form 4s; seven transactions were reported
late by Stanley S. Raphael on Form 4s; five transactions were reported late by
Mr. Elias on a Form 4; the Form 3 of William H. White was filed one day late;
one transaction was reported late by John E. Calaway on a Form 4; Mr. Long and
Mr. Baumler each reported one transaction on a 1998 year-end Form 5 that should
have been reported on a 1997 year-end Form 5; and Mr. Baumler's 1998 year-end
Form 5 was filed one day late.
EXECUTIVE COMPENSATION - Set forth below is information regarding the
compensation of each person who served as the Company's Chief Executive Officer
(the "CEO") during 1998 and the other executive officers of the Company whose
total annual salary and bonus exceeded $100,000 for 1998 (together with the CEO,
the "named officers").
SUMMARY COMPENSATION TABLE. The summary compensation table set forth below
contains information regarding the combined salary, bonus and other compensation
of each of the named officers for services rendered to the Company in 1998 and
1997 and to the Company's corporate predecessor in 1996.
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1) LONG TERM COMPENSATION
------------------------- -----------------------------------------------------------
NAME AND PRINCIPAL YEAR
POSITION SALARY BONUS(2) RESTRICTED STOCK SECURITIES ALL OTHER
AWARDS(3) UNDERLYING COMPENSATION(4)
OPTIONS/SARS
(SHARES)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John W. Elias (5) 1998 $43,750 --- --- --- ---
Chairman of the
Board and Chief
Executive Officer
- -----------------------------------------------------------------------------------------------------------------------------------
James D. Calaway 1998 $230,000 --- --- --- $6,180
President and 1997 $216,667 $110,000 $2,031,833 $116,940 $13,110
Chief Operating 1996 $200,000 --- --- --- $44,730
Officer
- -----------------------------------------------------------------------------------------------------------------------------------
Michael G. Long 1998 $150,000 --- --- --- $5,000
Senior Vice 1997 $137,500 $25,000 $25,000 $ 35,507 $2,406
President and 1996 $5,208 --- --- --- ---
Chief Financial
Officer
- -----------------------------------------------------------------------------------------------------------------------------------
Brian Baumler 1998 $100,000 $5,000 --- --- $3,000
Controller, 1997 $51,923 $5,000 $5,000 $7,000 ---
Treasurer
- -----------------------------------------------------------------------------------------------------------------------------------
John E. Calaway (6) 1998 $233,542 --- --- --- $626,236
Former Chairman 1997 $325,691 $140,000 --- $133,645 $17,469
of the Board and 1996 $331,647 --- --- --- $67,095
Chief Executive
Officer
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Other annual compensation for the named individuals during each of 1998,
1997, 1996 did not exceed the lesser of $50,000 or 10% of the annual
compensation earned by such individual.
(2) With respect to the 1997 bonus amounts set forth above, $105,000 of Mr.
John E. Calaway's bonus, $75,000 of Mr. James D. Calaway's bonus and all of
Mr. Long's and Mr. Baumler's bonus was paid in 1998.
(3) The restricted stock was awarded pursuant to the Incentive Plan. The
dollar value included in the table reflects the valuation at the time of
the award. Mr. Long's restricted stock award with respect to 1997 was made
in 1998. The number and value (based on the December 31, 1998 closing
price of the Company's Common Stock) of all vested and unvested restricted
stock holdings by each of the named officers as of December 31, 1998 was as
follows: Mr. James D. Calaway: 116,940 shares ($518,921); Mr. Michael G.
Long 1,851 shares ($8,214); and Mr. Brian Baumler 370 shares ($1,642).
Neither Mr. Elias nor Mr. John E. Calaway held any restricted stock at
December 31, 1998. The employment agreement of Mr. James D. Calaway
provides that (a) 58,470 shares of such restricted Common Stock vest
ratably over five years
9
<PAGE>
beginning on March 3, 1998 and (b) 58,470 shares of Common Stock (the
"Performance Shares"), vest on the earlier to occur of ten years or the
achievement of certain performance milestones. A Target Price per share of
Common Stock has been established for each year from 1997 through 2006. If
the average closing price per share for the Common Stock for the month of
December in any such year equals or exceeds the Target Price, (i) 20% of
the Performance Shares shall vest for that year and (ii) 20% of the
Performance Shares shall vest for each consecutive preceding year (starting
with 1997) for which no Performance Shares otherwise vested (not to exceed,
in the aggregate, the total number of Performance Shares awarded). The
Target Price is (x) $24.93 for 1998 and (y) for any calendar year
subsequent to 1998, 125% of the greater of the Target Price for the
preceding calendar year or the actual average closing price per share for
the Common Stock for the month of December for the preceding calendar year.
No Performance Shares have vested to date. The restricted stock of each of
Mr. Long and Mr. Baumler vests ratably over three years beginning December
23, 1998.
(4) Includes the Company's contributions under its 401(k) Plan, and amounts
paid for life insurance as follows: in the case of Mr. John E. Calaway,
$3,155 paid by the Company in 1998 and $3,795 paid by the Company in 1997,
and $1,180 paid by the Company's corporate predecessor in 1996, and in the
case of Mr. James D. Calaway, $1,180 paid by the Company in 1998 and $3,155
paid by the Company in 1997. For 1996 and 1997, includes the value of
overriding royalty interests granted in certain oil and gas prospects of
the Company. Messrs. John E. Calaway and James D. Calaway were not
entitled to receive overriding royalty interests granted during 1998 except
in certain limited circumstances where an option to acquire a lease was
held prior to the Offering. The value of such overrides granted during
1998 is estimated to be negligible. Messrs. Elias, Long and Baumler are
not entitled to any overriding royalty interests under the Company's
prospects. Certain other non-executive officer employees of the Company
have in the past and will in the future receive overriding royalty
interests pursuant to existing agreements between such employees and the
Company.
(5) Mr. Elias was appointed Chief Executive Officer and Chairman of the Board
in November 1998. Amount shown in table is the amount Mr. Elias received as
compensation for period from November 16, 1998 through December 31, 1998.
(6) Mr. John E. Calaway resigned from the Company in November 1998.
OPTION/SAR GRANTS. There were no grants of stock options during 1998 to
the named officers.
OPTION/SAR EXERCISES AND 1998 YEAR-END OPTION/SAR VALUES. Shown below is
information with respect to the value of the outstanding options held by the
named officers on December 31, 1998. No stock options were exercised by named
officers in 1998.
10
<PAGE>
<TABLE>
<CAPTION>
NAME SHARES VALUE NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED ON REALIZED UNEXERCISED OPTIONS/SARS AT FY-END(#) IN-THE-MONEY OPTIONS/SARS AT FY-
EXERCISE ($) END($)(1)
(#)
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John W. Elias --- --- --- --- --- ---
- ------------------------------------------------------------------------------------------------------------------------------------
James D. Calaway --- --- 60,616(2) 105,246 $17,000 -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Michael G. Long --- --- 7,101 28,406 -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Brian Baumler --- --- 1,667 5,333 -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
John E. Calaway --- --- 133,645 -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The excess, if any, of the market value of Common Stock at fiscal year end
($4.4375 per share) over the option exercise price.
(2) Includes 48,922 options at an exercise price of $4.09 per share and 11,694
options at an exercise price of $16.50 per share.
401(k) EMPLOYEE SAVINGS PLAN - The Company has a tax qualified 401(k)
Employee Savings Plan ("401(k) Plan") for its employees generally, in which the
executive officers also participate. Under the 401(k) Plan, eligible employees
are permitted to defer receipt of up to 15% of their compensation (subject to
certain limitations imposed under the Internal Revenue Code of 1986, as amended
(the "Code")). The 401(k) Plan provides that a discretionary match of employee
deferrals may be made by the Company in cash. Pursuant to the 401(k) Plan, the
Company elects to match 50% of the first 6% of employee deferral, with the
Company's contribution not to exceed $9,000, subject to limitations imposed by
the Internal Revenue Service. The amounts held under the 401(k) Plan are
invested among various investment funds maintained under the 401(k) Plan in
accordance with the directions of each participant. Salary deferral
contributions under the 401(k) Plan are 100% vested. Company contributions vest
ratably over five years. Participants or their beneficiaries are entitled to
payment of vested benefits upon termination of employment.
EMPLOYMENT AGREEMENTS - Mr. Elias was appointed Chairman of the Board and
Chief Executive Officer of the Company by the Board on November 16, 1998. Mr.
Elias has an employment agreement with the Company for an initial term ending
December 31, 2001 which will automatically extend for one year at the end of
each calendar year beginning at the end of 1999, unless either party gives at
least 30 days advance notice of non-renewal but in any event will not extend
beyond December 31, 2005 unless mutually agreed. Mr. Elias' employment
agreement calls for a minimum base salary of $350,000 per year during the first
three years which may be increased thereafter at the discretion of the
Compensation Committee. His employment agreement does not provide for an annual
bonus for the first year of employment. Thereafter he will be afforded a bonus
opportunity of up to 100% of base salary keyed to specific performance
objectives established by the Compensation Committee. In addition, the Company
agreed to an initial grant of stock options for the purchase of 200,000 shares
of
11
<PAGE>
Common Stock exercisable at fair market value of the Common Stock on January 8,
1999, and subsequent grants on January 1 of the years 2000 through 2004 for
50,000 shares each exercisable at the fair market value of the Common Stock on
the date of each subsequent grant. These options will have a ten-year term,
vesting one-third on the date of grant and in two additional increments of
one-third on the first and second anniversaries of the grant date. Such
agreement also provides that the Company will provide a $1,000,000 term life
insurance policy for Mr. Elias, together with a tax gross up payment in the
amount necessary to offset any applicable taxes imposed on him by reason of such
insurance policy. Upon termination of employment by the Company (except under
certain limited circumstances defined as "for cause" in the agreement) or by the
employee (except for certain reasons defined as "good reason" in the agreement),
Mr. Elias will generally be entitled to certain benefits (the "Termination
Benefits") including: (i) continued payment of his base salary then in effect
for the unexpired portion of the term of the agreement; (ii) immediate vesting
of all outstanding stock options granted by Company to employee exercisable for
a period of 12 months after such termination (but in no event beyond the
expiration of the original term of such stock option grants); (iii) a lump sum
cash payment equal to his incentive target bonus in the year of termination;
(iv) life insurance coverage and annual tax gross-up of premium payments shall
continue to be provided for the unexpired portion of the term of the agreement;
(v) cash payments equal to the amount credited to his account under any employee
profit sharing plan or stock ownership plans that are forfeitable in accordance
with the terms of such plans and (vi) participation for a period of 18 months
after the date of termination in all of Company's welfare benefit plans and
medical benefit coverage.
The employment agreement between the Company and Mr. James D. Calaway
provides for an annual base salary in an amount not less than $200,000 provided
that such 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 entitles Mr. Calaway to participate in all of the
Company's incentive, savings, retirement and welfare benefit plans in which
other executive officers of the Company participate. The agreement for
Mr. Calaway provides that he receive an annual bonus in an amount comparable to
the annual bonus of other Company executives, taking into account his position
and responsibilities. The agreement also provides for restricted stock awards
pursuant to the Incentive Plan, which stock awards are discussed in note 3 to
the "Summary Compensation Table." As provided for by his employment agreement,
Mr. Calaway previously received option grants, pursuant to the Incentive Plan,
to purchase 116,940 shares of Common Stock. The employment agreement of
Mr. Calaway has an initial five-year term ending March 3, 2002 provided that on
March 3, 1999 and on every anniversary thereafter, the term of such employment
agreement will automatically be extended for one year, such that the remaining
term of the agreement shall never be less than three years. Such agreement is
subject to the right of the Company and Mr. Calaway to terminate his employment
at any time. Upon termination of employment on account of disability or if
employment is terminated by the Company for any reason (except under certain
limited circumstances defined as "for cause" in the agreement), or if employment
is terminated by Mr. Calaway subsequent to a change of control (as defined) or
with good reason (as defined), he will generally be entitled to (i) an immediate
lump sum cash payment equal to 125% of his annual base salary for the remainder
of the term of the applicable agreement discounted at 6%, (ii) continued
participation in all the Company's welfare benefit plans and continued life
insurance and medical benefits coverage through the end of the remaining term of
such employment agreement and (iii) the immediate vesting of any stock options
or restricted stock previously granted to such employee and outstanding as of
the time immediately prior to the date of his termination, or, at the sole
discretion of Mr. Calaway, a cash payment (the "Cash Election") in lieu thereof
as more fully described in the next sentence, provided that
12
<PAGE>
the Performance Shares vest only if the termination of employment is by the
employee with good reason or during a window period or is by the Company without
cause. In the event of a Cash Election, Mr. Calaway will receive in exchange
for any or all compensatory awards that are either denominated in or payable in
Common Stock, including options and restricted 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 awards. The Term "Highest Price Per
Share" generally means the highest price per share tat can be determined to have
been paid or agreed to be paid for any share of Common Stock by certain classes
of persons, including (1) a beneficial owner of 10% or more of the outstanding
voting stock of the Company and (2) a person who has any material involvement in
proposing or effectuating a change of control (as defined). Such agreement
further provides that the Company will provide a $2 million term life insurance
policy for Mr. Calaway.
The employment agreement between the Company and Mr. Michael G. Long
provides for an annual base salary of $150,000 and entitles Mr. Long to
participate in all the Company's incentive, savings, retirement and welfare
benefit plans. Mr. Long is entitled to an annual bonus of up to 50% of his
base salary, to be paid approximately 25% in cash and 75% in shares of Common
Stock, which bonus shall be based on the achievement of the Company's annual
performance goals with respect to increases in oil and gas reserves per share
and audited annual net cash flow per share. Such performance goals were not
achieved for 1998 and accordingly Mr. Long did not receive a bonus for 1998. In
1997, pursuant to the agreement Mr. Long received an option for the purchase of
35,507 shares of Common Stock pursuant to the Incentive Plan. Mr. Long's
employment agreement has an automatically renewing two-year term. The agreement
is subject to the right of the Company and Mr. Long to terminate his employment
at any time. Upon termination of employment on account of disability or if
employment is terminated by the Company without cause (as defined) or by
Mr. Long subsequent to a change of control (as defined) or with good reason (as
defined), Mr. Long will be entitled to (i) a payment equal to his annual base
salary and (ii) the immediate vesting of any stock options or restricted stock
previously granted to him and outstanding as of the time immediately prior to
the date of his termination. Upon termination on account of death, the Company
shall be obligated to pay, in addition to any accrued benefits, an amount equal
to one-half of his annual base salary.
The employment agreement of each of Messrs. John W. Elias, James D. Calaway
and Michael G. Long provides for a covenant limiting competition with the
Company during employment with the Company, and, if the employment ends by
reason of the employee terminating his employment for other than good reason or
disability, for one year thereafter in the case of Mr. Long, for two years
thereafter in the case of Mr. Calaway and for as long as the Company is
providing him with Termination Benefits in the case of Mr. Elias.
Mr. Baumler and the Company are parties to an employment agreement which
provides for an initial salary of $100,000 and an option grant for 5,000 shares
of Common Stock at an exercise price of $16.50.
Mr. John E. Calaway and the Company were parties to an employment agreement
providing for an annual base salary in an amount not less than $295,000 and the
award of an annual cash bonus of $55,000 if the Company's audited annual net
cash flow increased by 15% or more relative to the audited net cash flow of the
prior calendar year, which bonus increased to $105,000 if such increase in
audited net cash flow was 25% or more. Pursuant to his employment agreement,
Mr. John E. Calaway received a restricted stock grant of 133,646 shares of
Common Stock divided evenly between shares vesting
13
<PAGE>
ratably over five years and shares vesting on the earlier to occur of ten years
or the achievement of certain performance milestones similar to those in effect
with respect to Mr. James D. Calaway's Performance Shares. As provided in his
employment agreement, Mr. John E. Calaway also received option grants, pursuant
to the Incentive Plan, to purchase 133,645 shares of Common Stock. Except as
set forth in this paragraph, Mr. John E. Calaway's employment agreement was
substantially similar to that of Mr. James D. Calaway. In connection with his
resignation, Mr. John E. Calaway and the Company entered into a severance
agreement waiving their respective claims under his employment agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION - The members
of the Compensation Committee of the Board of Directors are Messrs. Andrews,
Sfondrini, Benedict and Shower. During 1998, Messrs. Sfondrini and Andrews
were subject to certain transactions and relationships with the Company,
including, among other things, relating to certain oil and natural gas business
matters. These transactions and relationships are described under "Certain
Transactions."
SEVERANCE ARRANGEMENTS - Effective November 16, 1998, Mr. John E. Calaway
resigned as Chairman of the Board, Chief Executive Officer and a director of the
Company. In connection with such resignation, Mr. Calaway and the Company
entered into a separation agreement. The agreement provided that Mr. Calaway
received a lump sum payment of $600,000 and future payments of (i) $25,000 per
month during 1999 and (ii) $213,602 on January 7, 2000, with the amounts payable
pursuant to (i) and (ii) bearing interest payable quarterly by the Company
beginning January 1, 1999 at Chase Bank Texas, N.A.'s prime rate plus 1%
compounded monthly. Mr. Calaway also received a lump sum payment in the amount
of $26,236 for accrued but unused 1998 vacation. Mr. Calaway remains eligible
to participate in Company medical and dental coverage through February 25, 2002
and the Company will continue to provide a $2 million life insurance policy
through February 2002. Mr. Calaway's unvested stock options (covering 106,916
shares) were vested and all of his stock options will remain exercisable until
the expiration of their ten year term. In addition, 106,916 shares of unvested
restricted stock were vested. The separation agreement also provided that Mr.
Calaway would receive the annual bonus for 1998, if any, as provided by his
employment agreement. No bonus was awarded by the Company to any executive
officer including Mr. Calaway, for 1998, except that a $5,000 bonus was awarded
to Brian Baumler, the Company's Controller/Treasurer, for 1998. Mr. Calaway and
the Company waived their respective claims under his employment agreement,
including the covenant limiting competition. The separation agreement provided
for mutual releases of claims, requires Mr. Calaway to maintain the
confidentiality of certain information and required Mr. Calaway to agree to
provide certain consulting services through the period ending January 1, 1999.
PERFORMANCE GRAPH - The following performance graph compares the cumulative
total stockholder return on the Common Stock to the cumulative total return of
the Standard & Poor's 500 Stock Index and an index composed of all publicly
traded oil and gas companies identifying themselves by primary Standard
Industrial Classification (SIC) Code 1311 (Crude Petroleum and Natural Gas) for
the period beginning February 26, 1997 (the first day of trading of the Common
Stock) and ending December 31, 1998.
14
<PAGE>
[GRAPH]
<TABLE>
<CAPTION>
Edge S&P 500 Peer Group
SIC Code Index
<S> <C> <C> <C>
December 31, 1997 $69.70 $122.44 $98.93
December 31, 1998 $26.55 $160.13 $77.04
</TABLE>
PURSUANT TO SECURITIES AND EXCHANGE COMMISSION RULES, THE FOREGOING
PERFORMANCE GRAPH AND THE COMPENSATION COMMITTEE REPORT THAT FOLLOWS, ARE NOT
DEEMED "FILED" WITH THE COMMISSION AND ARE NOT INCORPORATED BY REFERENCE WITH
THE COMPANY'S REPORT ON FORM 10-K.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION - Until the meeting
of the Board on December 14, 1998, the members of the Compensation Committee
consisted of Messrs. Sfondrini, Andrews and Shower. Effective with the December
14, 1998 Board meeting, Mr. Benedict was appointed to serve on the Compensation
Committee. The Company's executive compensation has as its objectives to (a)
further the achievement of the Company's financial objectives, (b) focus
executives on attainment of growth and the creation of stockholder value over
time and (c) attract and retain the industry's most talented and motivated
executives. The executive compensation program is intended to provide an
overall level of compensation that the Compensation Committee believes, based on
its own judgment and experience, and, with respect to the Company's initial
compensation arrangements, on the findings and recommendations of a compensation
consultant retained by the Company, is competitive with levels of compensation
provided by other companies in the industry. The programs link each executive's
compensation directly to individual and Company performance. A significant
portion of each executive's total compensation is variable and dependent upon
the attainment of strategic and financial goals, individual performance
objectives and the appreciation in value of the Common Stock.
15
<PAGE>
Executive compensation primarily consists of three components (a) base
salary, (b) annual incentive compensation in the form of a bonus, paid in cash
or a combination of cash and stock and (c) long-term equity-based incentive
compensation. Each component is addressed in the context of individual and
Company performance and competitive conditions. In determining competitive
compensation levels, the Company analyzes data that includes information
regarding compensation levels and programs in the oil and natural gas
exploration and production industry, which was provided by a consultant retained
by the Company. The Company's compensation scheme focuses on both short-term
goals, through the awarding of annual bonuses, and long-term goals, through the
awarding of restricted stock and stock options.
Subject to applicable employment agreements, actual individual awards
and changes in remuneration of the individual executives are determined by the
Compensation Committee or the Board as a whole. The Chief Executive Officer
makes recommendations regarding the salaries and bonuses of Company employees.
Grants or awards of stock, including stock options, are individually determined
and administered by the Compensation Committee or the Board as a whole, taking
into account the recommendations from the Chief Executive Officer.
BASE SALARY. Base salaries are generally paid as established by
employment agreements with executive officers. Base salaries (including those
set forth in employment agreements) are based on the Board's review of a number
of factors, including the recommendations of a consultant, a review of
comparable industry data, and individual factors, such as an executive's
specific responsibilities, experience, individual performance and growth
potential. The employment contracts of the executive officers generally provide
that base pay is to be reviewed at least annually. In light of industry
conditions and the Company's performance, no raises were granted.
BONUS. The formulas for determining the annual bonuses of executive
officers are generally set forth in their respective employment agreements.
Annual bonuses are paid in cash or a combination of cash and stock, and are
determined by qualitative and quantitative factors including the achievement of
specified increases in audited annual cash flow and in light of the Company's
performance and the fact that specified quantitative targets were not attained
for 1998, no bonuses were awarded to Messrs. Calaway and Long. Mr. Elias'
employment agreement does not provide for an annual bonus for the first year of
his employment. Thereafter he will be afforded a bonus opportunity ranging to
100% of base salary keyed to specific individual and Company performance
objectives as established by the Compensation Committee. In light of his
expanded responsibilities and job performance, Mr. Baumler was awarded a $5,000
bonus for 1998.
LONG-TERM EQUITY-BASED COMPENSATION. The Company has generally relied
on grants of stock options and, to a lesser extent, grants of restricted stock,
under its Incentive Plan, to provide long-term incentive compensation. The
objectives of the Incentive Plan are to (i) attract and retain the services of
key employees, qualified independent directors and qualified consultants and
other independent contractors and (ii) encourage the sense of proprietorship in
and stimulate the active interest of those persons in the development and
financial success of the Company. At December 31, 1998, options under the
Incentive Plan had been granted to 32 employees and directors, at exercise
prices ranging from $10.75 per share to $16.50 per share. In addition, Mr.
Elias' employment agreement provides for the granting of options to purchase
200,000 shares exercisable at the fair market value of the Common Stock on
January 8, 1999, which options were not granted under the Incentive Plan.
16
<PAGE>
Grants of stock options are made by the Compensation Committee or the
Board as a whole. The employment agreements of each of executive officer set
forth the number and terms of their respective initial, and in the case of Mr.
Elias, certain subsequent, option grants. Additional option grants are made at
the discretion of the Compensation Committee or the Board as a whole. Relevant
factors in the determination of grants of options include data regarding stock
option grants at comparable companies, the consultant's recommendations and
recommendations of the Chief Executive Officer. Stock options granted to date
to executive officers vest in twenty percent increments over five years
following the date of grant. The exercise price of these stock options has been
equal to at least the fair market value of the Common Stock on the date of
grant; accordingly, executives receiving stock options are rewarded only if the
market price of the Common Stock appreciates. Stock options are thus designed
to align the interests of the Company's executives with those of its
stockholders by encouraging executives to enhance the value of the Company and
hence, the price of the Common Stock and each stockholder's return. The
specified quantitative targets were not attained for 1998; accordingly, no
bonuses were awarded to Messrs. Calaway and Long. Mr. Elias' employment
agreement does not provide for an annual bonus for the first year of his
employment. Thereafter he will be afforded a bonus opportunity ranging to
100% of base salary keyed to specific individual and Company performance
objectives as established by the Compensation Committee. In light of his
expanded responsibilities and job performance, Mr. Baumler was awarded a
$5,000 bonus for 1998.
Restricted stock awards are made by the Compensation Committee or the
Board as a whole. In the case of certain executive officers, initial restricted
stock awards were made pursuant to the terms of employment agreements, and in
addition, in the case of Mr. Long, subsequent restricted stock awards comprising
a portion of his annual bonus are made in accordance with the provisions of his
employment agreement. Other awards of restricted stock are made at the
discretion of the Compensation Committee or the Board as a whole. Restricted
stock awards were determined on the basis of factors similar to stock options.
The restricted stock granted to date to executive officers vests either (a)
ratably over a five-year period, (b) on the earlier to occur of ten years or the
achievement of specified increases in the price of the Company's Common Stock or
(c) ratably over a three-year period. In light of industry conditions and the
Company's performance, no restricted stock awards were made to executive
officers with respect to 1998.
SECTION 162(m) OF THE INTERNAL REVENUE CODE. Section 162(m) of the
Internal Revenue Code of 1986, as amended, generally limits (to $1 million per
covered executive) the deductibility for federal income tax purposes of annual
compensation paid to a company's chief executive officer and each of its other
four most highly compensated executive officers. All awards of stock options and
restricted stock under the Company's Incentive Plan are intended to qualify for
an exemption from the application of Section 162(m) of the Code, thereby
preserving the deductibility for federal income tax purposes of compensation
that may be attributable to such awards. The stock options to be awarded under
Mr. Elias' employment agreement do not qualify for exemption under Section
162(m). It is the Compensation Committee's intent that the majority of long
term incentive awards will qualify under Section 162(m), but it retains the
discretion to pay non-deductible amounts if that would be in the best interests
of the Company and stockholders under the circumstances.
17
<PAGE>
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Mr. Elias' compensation is
pursuant to the terms of his employment agreement, which was approved by the
Board as a whole and the Compensation Committee. In doing so, the Board and
Compensation Committee considered a variety of factors, including a review of
comparable industry data, the compensation package of Mr. Elias' predecessor at
the Company and negotiations between Mr. Elias and the Compensation Committee.
Mr. John E. Calaway's 1998 base salary was the same as his salary at year
end 1997, which the Compensation Committee believed appropriate in light of
industry conditions and Company performance and consistent with the fact that
there were no increases in base salary awarded in the ordinary course of
business to other executives of the Company. Based on the quantitative
performance objectives in his employment agreement, Mr. Calaway received no
bonus with respect to 1998. Mr. Calaway received no options or restricted stock
awards with respect to 1998. In connection with his resignation, the Company
and Mr. Calaway entered into a separation agreement providing for the vesting of
all of his unvested stock options and of certain of his unvested restricted
stock, as well as a series of lump sum payments by the Company to Mr. Calaway
designed to equal the lump sum severance payment contemplated by Mr. Calaway's
employment agreement.
The Compensation Committee
Vincent Andrews
David B. Benedict
John Sfondrini
Robert W. Shower
CERTAIN TRANSACTIONS
ESSEX ROYALTY JOINT VENTURES - A company wholly owned by Mr. Sfondrini
is the general partner of each of Essex Royalty Limited Partnership ("Essex I
L.P.") and Essex Royalty Limited Partnership II ("Essex II L.P."). In April
1992, a predecessor partnership of the Company and Essex I L.P. entered into a
Joint Venture Agreement (the "Essex I Joint Venture") with respect to the
purchase of certain royalty interests in oil and natural gas properties. The
initial term of the Essex I Joint Venture was four years, but by consent of both
parties to such agreement, it was extended until April 1997. Under the terms of
the Essex I Joint Venture Agreement, Essex I L.P. made capital contributions
aggregating $3 million and the Company and its predecessor made no capital
contributions. The Essex I Joint Venture Agreement provides that quarterly
distributions of cash be made, in accordance with the sharing ratios, in an
amount, subject to certain adjustments, not less than that equal to revenues
received from royalties less the management fee paid to the Company as managing
venturer. Initially, Essex I L.P. receives 100% of all cash distributions
pursuant to the sharing ratios. At such time as the cash and value of property
distributed to Essex I L.P. is equal to 110% of its capital contribution, the
sharing ratio shifts to 40% for the Company and 60% for Essex I L.P. As
managing venturer of the Essex I Joint Venture, the Company receives
reimbursement for costs incurred to acquire royalty interests, certain
administrative costs, a portion of the payroll costs attributable to the Essex I
Joint Venture and, during the term of the Essex I Joint Venture and prior to the
sharing ratio shift, a management fee equal to 1% of the capital contributions
of Essex I L.P. Because the Essex I Joint Venture terminated in April 1997, no
management fees accrued in 1998.
18
<PAGE>
In May 1994, the Company's predecessor partnership and Essex II L.P.
entered into a Joint Venture Agreement (the "Essex II Joint Venture") effective
until December 1997 and similar in nature to the Essex I Joint Venture. Essex
II Joint Venture was extended by consent of both parties to December 31, 1998.
Essex II L.P. made capital contributions aggregating approximately $2.8 million
and the Company and its predecessor made no capital contributions. Initially,
Essex II L.P. receives 100% of all cash distributions pursuant to the sharing
ratios. At such time as the cash and property distributed to Essex II L.P. is
equivalent to 111.3% of its capital contribution, the Company will thereafter
receive 25% of distributions. Provisions with respect to mandatory
distributions are similar to those described for the Essex I Joint Venture. As
managing venturer of the Essex II Joint Venture, the Company receives
reimbursement for costs incurred to acquire royalty interests, certain
administrative costs, a portion of the payroll costs attributable to the
Essex II Joint Venture and, during the term of the Essex II Joint Venture but
prior to the earliest to occur of a sharing ratio shift or the date that such
venture shall have expended its capital, a management fee of $30,000 every six
months.
The Company invoiced the Essex I and II Joint Ventures in the amount of
$9,600 and $61,558, respectively, for reimbursement of costs and expenses and
management fees in 1998. At December 31, 1998, the Company had accrued
receivables for management fees and reimbursements of $106,401 and $61,570 from
Essex I Joint Venture and Essex II Joint Venture, respectively.
SALES OF PROSPECTS TO AFFILIATES - A company wholly-owned by
Mr. Sfondrini and another corporation of which Mr. Andrews is an officer, are
the general partners of each of two limited partnerships that have invested, on
the same basis as outside parties, in two wells that the Company acts as
operator for. Such partnerships, in the aggregate, have a working interest of
8.33% in a well in the Barnett Project Area and a working interest of
approximately 30% in a well in the Tyler Project Area. As of December 31, 1998,
the partnerships had paid to the Company, in the aggregate, approximately
$282,436 (approximately $3,772 of which was paid in 1998) with respect to the
Barnett Project Area well and $838,158 (approximately $29,396 of which was paid
in 1998) with respect to the Tyler Project Area well, which represents in the
aggregate such partnerships' share of the costs to develop each such well
proportionate to their relative working interests therein.
JAMES C. CALAWAY CONSULTING AGREEMENT - Mr. James C. Calaway is Mr.
James D. Calaway's father. The Company is obligated to pay Mr. James C. Calaway
$40,000 annually for the remainder of his natural life pursuant to a March 1989
consulting agreement. Under the terms of such agreement, Mr. James C. Calaway
is obligated to provide consulting services as and to the extent mutually agreed
upon.
FRONTERA INVESTMENT - Mr. William H. White is a director of the
Company and currently serves as the Chairman of the Board of Frontera Resources
Corporation ("Frontera"). Mr. White is also founder and the owner of
approximately 30% of the outstanding common stock of Frontera. Mr. James D.
Calaway is President and a director of the Company and serves as a director of
Frontera, pursuant to the agreement described below.
The Company holds 15,171 shares of Series D Preferred Stock of
Frontera (the "Frontera Preferred") that were initially convertible into
approximately 10% of the fully diluted (excluding employee stock options)
outstanding shares of common stock of Frontera (the "Frontera Common"). The
Frontera Preferred is entitled to receive dividends on an "as converted" basis
with the Frontera Common and has a liquidation preference equal to its purchase
price amount. The Frontera Preferred
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ranks junior to certain previously outstanding preferred stock but senior to the
Frontera Common and certain shares of preferred stock previously issued to
members of management (including Mr. White). Upon receipt of its liquidation
preference, the Frontera Preferred participates with the Frontera Common on an
"as-converted" basis. The Frontera Preferred is convertible at any time into
Frontera Common and is automatically converted at the time of certain public
offerings of Frontera Common (a "Qualified Public Offering"). The Frontera
Preferred votes on an as-converted basis with the Frontera Common and is
entitled to vote as a class on certain actions being taken by Frontera.
The Company also entered into an investors agreement with Frontera,
Mr. White and certain other major stockholders of Frontera under which the
Company is entitled to certain registration rights whereby Frontera will at its
expense register the Frontera Common underlying the Frontera Preferred. In
addition, Frontera granted to the Company a "right of first offer" to purchase a
pro rata portion of certain issuances by Frontera of its voting securities.
Also, Mr. White and the other major holders granted to the Company a "co-sale
right" pursuant to which the Company has the right to participate on a pro rata
basis with respect to certain sales by such persons of Frontera voting
securities. The right of first offer and the co-sale right expire at the time
of a Qualified Public Offering. The investors agreement also provided that
James D. Calaway would be elected to and would remain a member of Frontera's
board of directors. The Company does not have the right to have Mr. Calaway
serve as a director at such time as it is not the (a) owner of 50% or more of
the Frontera Preferred it originally purchased or (b) beneficial owner of 5% or
more of the Frontera Common. The investors agreement also includes restrictions
on certain other actions of Frontera with respect to the issuance, redemption,
dividends, or changes in certain classes or series of Frontera stock and certain
amendments to its charter or bylaws.
Pursuant to a rights offering conducted by Frontera in November 1998 (the
"Rights Offering") the Company agreed to purchase 44,027 shares of Frontera
Common plus such additional shares, if necessary, to maintain its then current
8.73% interest of the partially diluted outstanding Frontera Common Stock
(assuming conversion of all preferred stock). The rights offering consisted of
two tranches. In connection with the first tranche, the Company paid Frontera
$116,672 in December 1998 for the 44,027 shares of Frontera Common Stock and
$5,626 in January 1999 for an additional 2,123 shares. Should Frontera exercise
the second tranche of the Rights Offering (which the Company believes may happen
during the second quarter of 1999), the Company will be obligated to purchase
another 44,027 shares and will have the option to purchase an additional 2,123
shares (for a total of 46,150 shares) to maintain its approximate 8.173%
interest in Frontera. In the event that the Company elects to purchase the full
46,150 shares, it will be required to pay Frontera an additional $122,298.
II. APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee, has
approved and recommends the appointment of Deloitte & Touche LLP as independent
public accountants to conduct an audit of the Company's financial statements for
the year 1999. This firm has acted as independent public accountants for the
Company and its immediate predecessor for a number of years.
Representatives of Deloitte & Touche LLP will attend the annual meeting and
will be available to respond to questions which may be asked by stockholders.
Such representatives will also have an opportunity to make a statement at the
meeting if they desire to do so.
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THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
APPOINTMENT OF DELOITTE & TOUCH LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS. In accordance with the Company's Bylaws, approval of the
appointment of independent public accountants will require the affirmative vote
of a majority of the shares of Common Stock voted at the meeting. Accordingly,
abstentions and broker non-votes applicable to shares present at the meeting
will not be included in the tabulation of votes cast on this matter.
III. OTHER BUSINESS
Management does not intend to bring any business before the meeting other
than the matters referred to in the accompanying notice. If, however, any other
matters properly come before the meeting, it is intended that the persons named
in the accompanying proxy will vote pursuant to discretionary authority granted
in the proxy in accordance with their best judgment on such matters. The
discretionary authority includes matters that the Board of Directors does not
know are to be presented at the meeting by others.
ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS - Rule 14a-8 under the Securities Exchange Act of
1934, as amended, addresses when a company must include a stockholder's proposal
in its proxy statement and identify the proposal in its form of proxy when the
company holds an annual or special meeting of stockholders. Under Rule 14a-8,
proposals that stockholders intend to have included in the Company's proxy
statement and form of proxy for the 2000 Annual Meeting of Stockholders must be
received by the Company no later than December 11, 1999. However, if the date
of the 2000 Annual Meeting of Stockholders changes by more than 30 days from the
date of the 1999 Annual Meeting of Stockholders, the deadline is a reasonable
time before the Company begins to print and mail its proxy materials, which
deadline will be set forth in a Quarterly Report on Form 10-Q or will otherwise
be communicated to stockholders. Stockholder proposals must also be otherwise
eligible for inclusion.
If a stockholder desires to bring a matter before an annual or special
meeting and the proposal is submitted outside the process of Rule 14a-8, the
stockholder must follow the procedures set forth in the Company's Bylaws. The
Company's Bylaws contain provisions requiring that advance notice be delivered
to the Company of any business to be brought by a stockholder before an annual
meeting of stockholders, and providing for certain procedures to be followed by
stockholders in nominating persons for election to the Board of Directors of the
Company. Generally, such advance notice provisions provide that written notice
must be given to the Secretary of the Company by a stockholder (i) in the event
of business to be brought by a stockholder before an annual meeting, not less
than 45 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders of the Company (with certain exceptions if the date of
the annual meeting is different by more than specified amounts from the
anniversary date) and (ii) in the event of nominations of persons for election
to the Board of Directors by any stockholder, (a) with respect to an election to
be held at the annual meeting of stockholders, not less than 45 days prior to
the anniversary date of the immediately preceding annual meeting of stockholders
of the Company (with certain exceptions if the date of the annual meeting is
different by more than specified amounts from the anniversary date) and (b) with
respect to an election to be held at a special meeting of stockholders for the
election of directors, not later than the close of
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business on the tenth day following the day on which notice of the date of the
special meeting was mailed to stockholders or public disclosure of the date of
the special meeting was made, whichever first occurs. If the date of the 2000
Annual Meeting of Stockholders is not more than 30 days before, nor more than 60
days after, the first anniversary of the date of the 1999 Annual Meeting,
stockholders who wish to nominate directors or to bring business before the 2000
Annual Meeting of Stockholders must notify the Company no later than March 27,
2000. Such notice must set forth specific information regarding such
stockholder and such business or director nominee, as described in the
Company's Bylaws. Compliance with the above procedures does not require the
Company to include the proposed nominee in the Company's proxy solicitation
material.
By Authorization of the Board of Directors
/s/ John W. Elias
John W. Elias
April 9, 1999 Chairman
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PROXY EDGE PETROLEUM CORPORATION PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD TUESDAY, MAY 11, 1999
The undersigned hereby appoints Michael G. Long and Brian Baumler,
jointly and severally, proxies, with full power of substitution and with
discretionary authority, to represent and to vote, in accordance with the
instructions set forth below, all shares of Common Stock which the
undersigned is entitled to vote at the 1999 annual meeting of stockholders of
Edge Petroleum Corporation (the "Company"), to be held on Thursday, May 11,
1999, at the Doubletree Hotel, 400 Dallas Street, Houston, Texas 77002, at
10:00 a.m. or at any adjournment thereof, hereby revoking any proxy
heretofore given. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN. IN THE ABSENCE OF SPECIFIC DIRECTIONS TO THE CONTRARY,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF EACH OF THE DIRECTORS NAMED
BELOW, FOR THE APPROVAL OF DELOITTE & TOUCHE, LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR 1999, AND IN THE DISCRETION OF THE
PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
The undersigned hereby acknowledges receipt of the notice of, and Proxy
Statement for, the aforesaid Annual Meeting.
(1) ELECTION OF / / FOR all nominees listed / / WITHHOLD
DIRECTORS below (except as marked AUTHORITY to vote for
to the contrary below) all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME BELOW.)
NOMINEES: VINCENT S. ANDREWS, DAVID B. BENEDICT AND NILS P. PETERSON
/ / FOR / / AGAINST / / ABSTAIN
(2) PROPOSAL TO APPROVE THE APPOINTMENT OF DELOITTE & TOUCHE LLP as the
independent public accountants for the Company for 1999.
/ / FOR / / AGAINST / / ABSTAIN
(3) With discretionary authority as to such other matters as may properly come
before the meeting.
/ / FOR / / AGAINST / / ABSTAIN
---------------------------------------
Signature
Date: , 1999
---------------------------
(If signing as Attorney, Administrator,
Guardian, Trustee or Corporate Officer,
please add your title as such.)
PLEASE SIGN, DATE AND RETURN PROMPTLY.
