As filed with the Securities and Exchange Commission on June 2, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------
EDGE PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 76-0511037
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Texaco Heritage Plaza
1111 Bagby, Suite 2100
Houston, Texas 77002
(713) 654-8960
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
----------
Michael G. Long
Senior Vice President and Chief Financial Officer
Edge Petroleum Corporation
Texaco Heritage Plaza
1111 Bagby, Suite 2100
Houston, Texas 77002
(713) 654-8960
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------
Copy to:
Gene J. Oshman
Baker & Botts, L.L.P.
3000 One Shell Plaza
910 Louisiana
Houston, Texas 77002
(713) 229-1178
----------
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
----------
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
================ ============ ================== ================== ============
Title of Each
Class of Amount Proposed Maximum Proposed Maximum Amount of
Securities to be to be Offering Price Per Aggregate Offering Registration
Registered Registered Share Price Fee
================ ============ ================== ================== ============
Common Stock,
par value $.01
per share 1,820,000(1) $7.19 (2) $13,085,800 (2) $3,637.85(2)
- ---------------- ------------ ------------------ ------------------ ------------
Common Stock
Warrants 420,000(1) - - -
- ---------------- ------------ ------------------ ------------------ ------------
Total - - - $3,637.85(2)
================ ============ ================== ================== ============
(1) Includes 420,000 shares of Common Stock that may be issued pursuant to the
exercise of the Warrants (plus in accordance with Rule 416 of the
Securities Act of 1933, an indeterminate number of shares of Common Stock
to cover any adjustment in the number of shares issuable as a result of the
antidilution provisions of the Warrants). We are also registering the
420,000 Common Stock Warrants.
(2) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(o). Pursuant to Rule 457(c) for the Common Stock, the proposed
maximum offering price has been calculated based on the average of the high
and low prices of the Common Stock on the Nasdaq National Market on May 25,
1999. Pursuant to Rule 457(g), no separate registration fee is required for
the registration of the Warrants because the Warrants are to be registered
for distribution in the same registration statement as the Common Stock to
be offered pursuant to the exercise of the Warrants.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
Subject to Completion
Preliminary Prospectus dated June 1, 1999
The information in this prospectus is not complete and may change. This
prospectus is included in a registration statement that we filed with the
Securities and Exchange Commission. The selling holders cannot sell these
securities until that registration statement becomes effective. This prospectus
is not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
PROSPECTUS
1,820,000 Shares of Common Stock
420,000 Common Stock Warrants
Edge Petroleum Corporation
----------
This prospectus covers the offer and sale of warrants for the purchase of
common stock and of shares of common stock (including the shares issuable upon
the exercise of the warrants) by the selling holders identified on p. 13 of this
prospectus. We will not receive any proceeds from these sales.
The selling holders may offer and sell the shares and the warrants from
time to time. The selling holders may offer the shares and the warrants at
prevailing market prices, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices.
The common stock is quoted on the Nasdaq National Market under the symbol
EPEX. On May 26, 1999, the last reported sale price of the common stock on the
Nasdaq National Market was $7 1/8.
You should consider carefully the risk factors beginning on page 3 of this
prospectus before purchasing any of the common stock or warrants.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------
The date of this Prospectus is June 1,1999.
<PAGE>
Table of Contents
-----------------
Page
----
Edge Petroleum Corporation ........................................... 3
Risk Factors ........................................................ 3
Forward-Looking Statements ........................................... 11
Use of Proceeds .................................................... 12
Selling Holders .................................................... 13
Plan of Distribution ............................................... 15
Description of Capital Stock ....................................... 16
Description of Warrants ............................................. 19
Legal Matters ....................................................... 20
Experts ............................................................. 20
Where You Can Find More Information .................................. 20
----------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. You should
assume that the information appearing in this prospectus is accurate as of the
date on the front cover of this prospectus only. Our business, financial
condition, results of operations and prospects may have changed since that date.
2
<PAGE>
Edge Petroleum Corporation
Edge Petroleum Corporation is an independent energy company engaged in
the exploration, development and production of oil and natural gas. We conduct
our operations along the onshore U.S. Gulf Coast with primary emphasis in South
Texas and Louisiana. Our activity is focused on known hydrocarbon producing
trends, particularly those with natural gas production. In South Texas and
Louisiana we controlled in excess of approximately 222,000 gross acres under
lease or option to lease as of March 31, 1999. We use advanced geologic,
engineering and geophysical computer software and technology to improve our
ability to understand and quantify the risks involved in the exploration and
development of oil and natural gas. We believe this approach allows us to more
accurately identify and predict potential accumulations of oil and natural gas.
We believe that even though the tools and techniques we utilize are currently
employed extensively by the major oil and natural gas companies, our approach to
processing and analyzing seismic data helps to set us apart from other
independent exploration and production companies.
Our principal executive offices are located at Texaco Heritage Plaza,
1111 Bagby, Suite 2100, Houston, Texas 77002, and our telephone number at that
location is (713) 654-8960.
Risk Factors
You should carefully consider the risks described below before making
an investment decision. The risks and uncertainties described below are not the
only ones facing our company.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
such case, the trading price of the common stock could decline, and you may lose
all or part of your investment.
Exploratory drilling is a speculative activity and involves numerous risks and
substantial and uncertain costs
We depend in large part upon the success of our exploratory drilling
program. Exploratory drilling involves many risks, including the risk that we
will not find oil and natural gas at all or in reservoirs from which we can
economically produce the oil and natural gas. The cost of drilling, completing
and operating wells is substantial and uncertain. Numerous factors beyond our
control may cause the curtailment, delay or cancellation of drilling operations,
including:
o unexpected drilling conditions,
o pressure or irregularities in formations,
o equipment failures or accidents,
o adverse weather conditions,
o compliance with governmental requirements, and
o shortages or delays in the availability of drilling
rigs or delivery crews and the delivery of equipment.
Despite our ability to use three dimensional seismic data and other advanced
technology, exploratory drilling remains a speculative activity. Even when fully
utilized and properly interpreted, 3-D seismic data and visualization techniques
only assist geoscientists in identifying subsurface structures and do not allow
the interpreter to know with certainty if hydrocarbons will in fact be present
in these structures if they are drilled. In addition, the use of
3
<PAGE>
3-D seismic data and these advanced technologies requires greater pre-drilling
expenditures than traditional drilling strategies and we could incur losses as a
result of such expenditures. Although we may disclose our overall drilling
success rate for activity within a particular project area, those rates may
decline. Although we may discuss drilling prospects that we have identified or
budgeted for, we may ultimately not lease or drill these prospects within the
expected time frame, or at all. We may identify prospects through a number of
methods, some of which do not include interpretation of 3-D or other seismic
data. The drilling and results for these prospects may be particularly
uncertain. We may not be able to lease or drill a particular prospect because,
in some cases, we identify a prospect or drilling location before seeking an
option or lease rights in the prospect or location. Lack of drilling success
will have an adverse effect on our future results of operations and financial
condition.
Oil and natural gas prices are highly volatile in general and low prices during
1998 negatively affected our financial results and may continue to do so in the
future
Oil and natural gas prices can have a significant impact on our
revenues, profitability, cash flow, future growth and ability to borrow funds or
obtain additional capital, as well as the carrying value of our properties.
Lower oil and natural gas prices also may reduce the amount of oil and natural
gas that we can produce economically. Oil and natural gas prices declined
substantially in 1998 and, despite recent improvement, could decline again or
continue to remain low by historic standards. These declines had a significant
negative impact on our financial results for 1998. Continued depressed prices
would have a negative impact on our future financial results. Our reserves are
predominantly natural gas; therefore changes in natural gas prices may have a
particularly large impact on our financial results.
Historically, the markets for oil and natural gas have been volatile,
and we expect those markets to continue to be volatile in the future. The prices
we receive for our products are subject to wide fluctuation in response to
relatively minor changes in the supply of and demand for oil and natural gas,
market uncertainty and a variety of additional factors that are beyond our
control. These factors include:
o the level of consumer product demand,
o weather conditions,
o domestic and foreign governmental regulations,
o the price and availability of alternative fuels,
o political conditions,
o the foreign supply of oil and natural gas,
o the price of foreign imports, and
o overall economic conditions.
It is impossible to predict future oil and natural gas price movements with
certainty.
We periodically review the carrying value of our oil and natural gas properties
under applicable accounting rules. These rules, require a write down of the
carrying value of oil and natural gas properties if the carrying value exceeds
applicable estimated discounted future net revenues. As a result of the sharp
commodity price declines during 1998, as of December 31, 1998, we wrote down the
carrying value of our properties, recognizing a non-cash charge of approximately
$10 million. If oil and natural gas prices decline from the December 31, 1998
levels, additional write downs may be required. Whether we will be required to
take such a charge will depend on the
4
<PAGE>
prices for oil and natural gas at the end of any quarter and the effect of
reserve additions or revisions and capital expenditures during such quarter.
In order to reduce our exposure to short-term fluctuations in the price
of natural gas, we sometimes enter into hedging arrangements. Our hedging
arrangements apply to only a portion of our production and provide only partial
price protection against declines in natural gas prices. These hedging
arrangements may expose us to risk of financial loss and limit the benefit to us
of increases in the price of natural gas.
Maintaining reserves and revenues in the future depends on successful
exploration and development
In general, production from oil and natural gas properties declines as
reserves are depleted, with the rate of decline depending on reservoir
characteristics. Unless we conduct successful exploration and development
activities or acquire properties containing proved reserves or both, our proved
reserves will decline. Our future production is, therefore, highly dependent
upon our level of success in finding or acquiring additional reserves.
Our credit facility has substantial operating restrictions and financial
covenants and we may have difficulty obtaining additional credit
As of May 31, 1999, our borrowings under our revolving credit facility
totaled $7,150,000 with $1,450,000 available for additional borrowings. As of
May 31, 1999, we are negotiating an increase in our existing $8,600,000
revolving credit borrowing base in light of our reserve growth since year-end
1998 and the generally higher level of commodity prices that have been reached
since year-end. We may not be able to obtain that borrowing base increase. The
limited availability of additional credit under the current terms of our
revolving credit facility reduces our flexibility to changing business and
economic conditions and limits our ability to increase our capital expenditures.
Our credit facility is secured by a pledge of substantially all of our assets
and has covenants that limit additional borrowings, sales of our assets and that
prohibit the payment of dividends, the incurrence of liens and limit the
distributions of cash or properties.
At December 31, 1998, we were not in compliance with two of the
financial covenants of our then-existing credit facility. As a result, we
entered into a restructured facility on March 18, 1999 providing for new
financial covenants, among other things. The restructured facility had a $12
million borrowing base and consisted of a $3 million term loan due in August
1999 which has been repaid in full and a $9 million revolving credit facility,
which has a borrowing base of $8,600,000 as of May 31, 1999. Beginning May 1,
1999, and on the first day of month thereafter, unless renegotiated, the
borrowing base under the revolving credit is required to be reduced by $400,000.
The restrictions of our credit facility and the difficulty in obtaining
additional debt financing may have adverse consequences on our operations and
financial results, including the following:
o our ability to obtain financing for working capital, capital
expenditures our drilling program, purchases of new technology or
other purposes may be impaired or such financing may be on terms
unfavorable to us;
o we may be required to use a substantial portion of our cash flow to
make debt service payments, which will reduce the funds that would
otherwise be available for operations and future business
opportunities;
o a substantial decrease in our operating cash flow or an increase in
our expenses could make it difficult for us to meet debt service
requirements and require us to modify operations; and
o we may become more vulnerable to downturns in our business or the
economy generally.
5
<PAGE>
Our ability to obtain and service indebtedness will depend on our future
performance, including our ability to manage cash flow and working capital,
which are in turn subject to a variety of factors beyond our control. Our
business may not generate cash flow at or above anticipated levels or we may not
be able to borrow funds in amounts sufficient to enable us to service
indebtedness, make anticipated capital expenditures or finance our drilling
program. If we are unable to generate sufficient cash from operations or to
borrow sufficient funds in the future to service our debt, we may be required to
curtail portions of our drilling program, sell assets, reduce capital
expenditures, refinance all or a portion of our existing debt or obtain
additional financing. We may not be able to refinance our debt or obtain
additional financing, particularly in view of current industry conditions, the
restrictions on our ability to incur debt under our existing debt arrangements,
and the fact that substantially all of our assets are currently pledged to
secure obligations under our bank credit facility.
We are subject to substantial operating risks
Our operations are subject to operating hazards such as:
o well blowouts,
o mechanical failures,
o explosions,
o uncontrollable flows of oil, natural gas or well fluids,
o fires,
o formations with abnormal pressures, and
o pollution, releases of toxic gas and other environmental
hazards and risks.
We could suffer substantial losses as a result of any of these events. We are
not fully insured against all risks incident to our business.
We are not the operator of some of our wells. As a result, our
operating risks for those wells and our ability to influence the operations for
these wells is less subject to our control. Operators of these wells may act in
ways that are not in our best interests.
The loss of key personnel could adversely affect us
We view our management team as a strength of the company; however, we
are a relatively small company without substantial depth of management
personnel. As a result, the loss of our executive officers and other key
employees, could have a material adverse effect on our operations. We do not
maintain key-man life insurance with respect to any of our employees. We believe
that the technical expertise of our employees helps to distinguish us from other
independent oil and natural gas companies. A portion of our success is therefore
particularly dependent upon our ability to continue to employ and retain skilled
technical personnel.
6
<PAGE>
Our success depends on our ability to utilize changing technology and we face
the risk of technological obsolescence
We believe that our ability to utilize state of the art technologies
currently gives us an advantage over many of our competitors. We may not be able
to maintain this advantage. We are dependent upon the utilization of changing
technology. As a result, our ability to adapt to changing technologies, obtain
new products and maintain technological advantages will be important to our
future success. We may not be able to successfully utilize, or expend the
financial resources necessary to acquire, new technology. One or more of the
technologies we currently utilize or that we may implement in the future may
become obsolete. If one of those events were to occur, our financial condition
and results of operations could be materially adversely affected.
Our operations have significant capital requirements
We have experienced and expect to continue to experience substantial
working capital needs due to our active exploration and development and
technology development programs. Additional financing may be required in the
future to fund our growth and developmental and exploratory drilling and
continued technological development. We may not be able to obtain such
additional financing on acceptable terms and financing may not be available
under our existing or any future credit facilities. In the event such capital
resources are not available, our drilling and other activities may be curtailed.
Governmental regulation and liability for environmental matters may adversely
affect our business and results of operations
Oil and natural gas operations are subject to various federal, state
and local government regulations, which may be changed from time to time.
Matters subject to regulation include:
o discharge permits for drilling operations,
o drilling bonds,
o reports concerning operations,
o the spacing of wells,
o unitization and pooling of properties, and
o taxation.
From time to time, regulatory agencies have imposed price controls and
limitations on production by restricting the rate of flow of oil and natural gas
wells below actual production capacity in order to conserve supplies of oil and
natural gas. Federal, state and local laws and regulations primarily relating to
protection of human health and the environment, are applicable to the
development, production, handling, storage, transportation and disposal of oil
and natural gas, by-products of oil and natural gas and other substances and
materials produced or used in connection with oil and natural gas operations. In
addition, we may be liable for environmental damages caused by previous owners
of property we purchase or lease. As a result, we may incur substantial
liabilities to third parties or governmental entities. We are also subject to
changing and extensive tax laws. If new laws are implemented or existing laws
are modified, those events could have a material adverse effect on us.
7
<PAGE>
We may have difficulty managing our growth and the related demands on our
resources and may have difficulty in achieving future growth
We have experienced growth in the past through the expansion of our
drilling program. Our growth has placed, and may continue to place, a
significant strain on our financial, technical, operational and administrative
resources. Any future growth will place additional demands on those resources.
Our ability to continue our growth will depend upon a number of factors,
including:
o our ability to identify and acquire new exploratory sites
and to develop existing sites,
o our ability to continue to retain and attract skilled
personnel,
o the results of our drilling program,
o hydrocarbon prices, and
o access to capital.
We may not be successful in achieving growth or any other aspect of our business
strategy.
We face strong competition from larger oil and natural gas companies
Our competitors include major integrated oil and natural gas companies
and numerous independent oil and natural gas companies, individuals and drilling
and income programs. Many of our competitors are large, well-established
companies with substantially larger operating staffs and greater capital
resources than us. We may not be able to successfully conduct our operations,
evaluate and select suitable properties and consummate transactions in this
highly competitive environment.
Specifically, these larger competitors may be able to:
o pay more than we can for exploratory prospects and
productive oil and natural gas properties,
o define, evaluate, bid for and purchase a greater number
of properties and prospects than our financial or human
resources permit, and
o expend greater resources on the existing and changing
technologies that will be increasingly important to
attaining success in the industry.
The oil and natural gas reserve data included in or incorporated by reference
into this document are only estimates and may prove to be inaccurate
There are numerous uncertainties inherent in estimating oil and natural
gas reserves and their estimated values. The reserve data included in or
incorporated by reference into this prospectus represent only estimates which
may prove to be inaccurate because of those uncertainties. Reservoir engineering
is a subjective and inexact process of estimating underground accumulations of
oil and natural gas that cannot be measured in an exact manner. Estimates of
economically recoverable oil and natural gas reserves depend on a number of
variable factors, such as historical production from the area compared with
production from other producing areas, and assumptions concerning:
o the effects of regulations by governmental agencies,
o future oil and natural gas prices,
8
<PAGE>
o future operating costs,
o severance and excise taxes,
o development costs, and
o workover and remedial costs.
Some or all of these assumptions may in fact vary considerably from actual
results. For these reasons, estimates of the economically recoverable quantities
of oil and natural gas attributable to any particular group of properties,
classifications of such reserves based on risk of recovery, and estimates of the
future net cash flows from reserves prepared by different engineers or by the
same engineers but at different times may vary substantially. Accordingly,
reserve estimates may be subject to downward or upward adjustment. Actual
production, revenues and expenditures with respect to our reserves will likely
vary from estimates, and such variances may be material.
The information regarding discounted future net cash flows included in
or incorporated by reference in this prospectus should not be considered as the
current market value of the estimated oil and natural gas reserves attributable
to our properties. As required by the SEC, the estimated discounted future net
cash flows from proved reserves are based on prices and costs as of the date of
the estimate, while actual future prices and costs may be materially higher or
lower. Actual future net cash flows also will be affected by factors such as:
o the amount and timing of actual production,
o supply and demand for oil and natural gas,
o increases or decreases in consumption, and
o changes in governmental regulations or taxation.
In addition, the 10% discount factor, which is required by the SEC to
be used in calculating discounted future net cash flows for reporting purposes,
is not necessarily the most appropriate discount factor based on interest rates
in effect from time to time and risks associated with our operations or the oil
and natural gas industry in general.
Our acquisition program may be unsuccessful, particularly in light of our
limited acquisition experience
We generally seek to explore for oil and natural gas rather than to
purchase producing properties. Because we have not typically purchased
properties, we may not be in as good a position as our more experienced
competitors to execute a successful acquisition program. The successful
acquisition of producing properties requires an assessment of recoverable
reserves, future oil and natural gas prices, operating costs, potential
environmental and other liabilities and other factors. Such assessments, even
when performed by experienced companies, are necessarily inexact and their
accuracy inherently uncertain. Our review of subject properties, which generally
includes on-site inspections and the review of reports filed with various
regulatory entities, will not reveal all existing or potential problems,
deficiencies and capabilities. We may not always perform inspections on every
well, and may not be able to observe structural and environmental problems even
when we undertake an inspection. Even when problems are identified, the seller
may be unwilling or unable to provide effective contractual protection against
all or part of such problems.
9
<PAGE>
Foreign political and economic developments may hurt our foreign investments
Our investment in Frontera Resources Corporation, which operates in
among other places, the former Soviet Republic of Georgia, Azerbaijan and
Bolivia, exposes us to risks related to overseas operations. Operations in
foreign countries can be subject to a variety of local laws and regulations
requiring qualifications, use of local labor, the provision of financial
assurances or other restrictions and conditions on operations. Foreign
operations can also be subject to risks of:
o war, civil disturbances and political instability,
o unenforceability of foreign contracts,
o problems in the relationship between a foreign country and
the United States,
o fluctuations in currency exchange rates, and
o governmental activities that may limit or disrupt markets,
restrict the movement of funds or result in the deprivation
of contract rights or the taking of property without fair
compensation.
Local laws and regulations and events like those described above could limit
Frontera's ability to operate in foreign countries or otherwise have a material
adverse affect on the value of our investment.
We may be vulnerable to Year 2000 failures that could lead to an uninsured
business interruption
A Year 2000 failure could result in a business interruption that
adversely affects our business, financial condition or results of operations. We
are not insured for this type of loss.
We do not intend to pay dividends and our ability to pay dividends is restricted
We currently intend to retain any earnings for the future operation and
development of our business and do not currently anticipate paying any dividends
in the foreseeable future. We are presently restricted from paying dividends
under our credit facility. Any future dividends also may be restricted by our
then-existing loan agreements.
We cannot market our production without the assistance of third parties
The marketability of our production depends upon the proximity of our
reserves to, and the capacity of third party services and facilities, including:
o oil and natural gas gathering systems,
o pipelines, trucking or terminal facilities, and
o processing facilities.
The unavailability or lack of capacity of the items listed above could result in
the shut-in of producing wells or the delay or discontinuance of development
plans for properties. A shut-in or delay or discontinuance could adversely
affect our financial condition. In addition, Federal and state regulation of oil
and natural gas production and transportation could adversely affect our ability
to produce and market our oil and natural gas on a profitable basis.
10
<PAGE>
Provisions of Delaware law and our charter and bylaws may delay or prevent
transactions that would benefit stockholders
Our certificate of incorporation and bylaws and Delaware law contain
provisions that may have the effect of delaying, deferring or preventing a
change of control of the company. These provisions, among other things:
o provide for a classified board of directors with
staggered terms,
o restrict the ability of stockholders to take
action by written consent,
o authorize the board of directors to set the terms
of preferred stock, and
o restrict our ability to engage in transactions
with 15% stockholders.
Because of these provisions, persons considering unsolicited tender offers or
other unilateral takeover proposals may be more likely to negotiate with our
board of directors rather than pursue non-negotiated takeover attempts. As a
result, these provisions may make it more difficult for our stockholders to
benefit from transactions that are opposed by an incumbent board of directors.
Sales of large number of shares may lower our share price
The average weekly trading volume for our common stock for the five
months ended May 31, 1999 was 38,718. This prospectus covers the offer and
sale by selling holders of 1,820,000 shares of common stock (including shares
issuable upon exercise of warrants). These shares previously were not freely
tradeable in the market. Our share price may decline if selling holders sell a
large number of shares over a short time period.
Forward-Looking Statements
This prospectus includes or incorporates by reference forward-looking
statements including, but not limited to, those related to the negotiation of
new credit facility terms. These forward-looking statements reflect our current
view of future events and financial performance. These forward-looking
statements involve risks and uncertainties, including, among other things those
relating to:
o the numerous risks and substantial and uncertain costs
associated with exploratory drilling,
o the volatility of oil and natural gas prices and the
effects of relatively low prices for our products,
o conducting successful exploration and development in
order to maintain reserves and revenues in the future,
o operating risks of oil and natural gas operations,
o our dependence on key personnel,
o our ability to utilize changing technology and the
risk of technological obsolescence,
11
<PAGE>
o significant capital requirements of our exploration
and development and technology development programs,
o governmental regulation and liability for
environmental matters,
o management of growth and the related demands on our
resources,
o competition from larger oil and natural gas companies,
o the potential inaccuracy of estimates of oil and
natural gas reserve data,
o property acquisition risks,
o the potential impact of foreign political and economic
developments on our foreign investments,
o possible business interruption as the result of Year
2000 problems, and
o other factors detailed in this document and our other
filings with the SEC.
The words "budgeted," "anticipate," "estimate," "expect," "may,"
"project," "believe," "potential" and similar expressions are intended to be
among the statements that identify forward looking statements. We caution you
not to place undue reliance on these forward-looking statements, which speak
only as of their dates. We undertake no obligation to publicly update or review
any forward-looking statement, whether as a result of new information, future
events, or otherwise. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual outcomes
may vary materially from those indicated.
Use of Proceeds
We will not receive any proceeds from sales of common stock and
warrants by the selling holders.
12
<PAGE>
Selling Holders
This prospectus covers the offer and sale by the selling holders listed
in the following table of up to 420,000 warrants, each exercisable for one share
of common stock, and 1,820,000 shares of common stock (including up to 420,000
shares issuable upon exercise of the warrants). We originally issued 1,400,000
shares and 420,000 warrants for cash on May 6, 1999. The selling holders listed
below consist of the purchasers of the shares and warrants in that private
placement.
The following table sets forth certain information known to us
regarding beneficial ownership of common stock by the selling holders as of May
31, 1999, and as adjusted to reflect solely the sale of the shares of common
stock (including the sale of the shares of common stock for which the warrants
are exercisable) and warrants offered by this prospectus. The shares that may be
obtained upon exercise of the warrants are reflected in the amounts set forth
under the heading "Shares Offered--Shares Underlying Warrants" and are deemed to
be beneficially owned and accordingly are reflected in the amounts set forth
under the heading "Shares Beneficially Owned Before Offering--Shares Underlying
Warrants." No holder named in the table below will hold more than 1% of either
the outstanding warrants or the outstanding common stock after the offering.
<TABLE>
Shares
Beneficially
Owned
Before
Offering Shares Offered
----------------------- Warrants ----------------------
Shares Beneficially Shares
Outstanding Underlying Owned Before Outstanding Underlying Warrants
Selling Holder Shares Warrants Offering Shares Warrants Offered
----------- ----------- ------------ ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Mark G. Egan(1) 19,000 5,700 5,700 19,000 5,700 5,700
The Private Investment
Fund(1) 681,000 204,300 204,300 681,000 204,300 204,300
Special
Situations Private
Equity Fund, L.P.(2) 228,161 68,448 68,448 228,161 68,448 68,448
Special
Situations
Fund III, L.P.(2) 241,379 72,414 72,414 241,379 72,414 72,414
Special
Situations Cayman
Fund, L.P.(2) 80,460 24,138 24,138 80,460 24,138 24,138
Fidelity Management
Trust C/F IRA Rollover
F/B/O John W. Elias(3) 150,000 45,000 45,000 150,000 45,000 45,000
- ---------------
</TABLE>
(1) The Schedule 13G, as amended, dated May 6, 1999, filed with the SEC, states
that Marlin Capital Corp. is the general partner of The Private Investment Fund
and that Mr. Mark G. Egan is the sole shareholder and president of Marlin
Capital Corp. and is a limited partner of The Private Investment Fund. The
Schedule 13G states that Mr. Egan individually owns 24,700 shares of common
stock (including 5,700 shares that may be obtained through the exercise of
warrants) and may be deemed to have indirect beneficial ownership of the 885,300
shares of common stock (including 204,300 shares that may be obtained through
the exercise of warrants) owned by The Private Investment Fund.
(footnotes continued on next page)
13
<PAGE>
(2) The Schedule 13G dated May 6, 1999, filed with the SEC, states that (a) MGP
Advisers Limited Partnership is the general partner of and investment adviser to
Special Situations Fund III, L.P., (b) MG Advisers L.L.C. is the general partner
and investment adviser to Special Situations Private Equity Fund, L.P., (c) AWM
Investment Company, Inc. is the general partner of MGP Advisers Limited
Partnership and the general partner and investment adviser to Special Situations
Cayman Fund, L.P., and (d) Messrs. Austin W. Marxe and David Greenhouse serve as
officers, directors and members or principal shareholders of MGP Advisers
Limited Partnership, MG Advisers L.L.C. and AWM Investment Company, Inc. The
Schedule 13G states that Messrs. Marxe and Greenhouse may be deemed to
beneficially own all of the 715,000 shares (including 165,000 shares that may be
obtained through the exercise of warrants) owned, in the aggregate, by Special
Situations Fund III, Special Situations Private Equity Fund and Special
Situations Cayman Fund.
(3) The Fidelity Management Trust C/F IRA Rollover F/B/O John W. Elias is a
trust for the benefit of Mr. John W. Elias, the chief executive officer and
chairman of the board of Edge Petroleum. Mr. Elias is the grantor and the
beneficiary of such trust. Mr. Elias also individually holds 20,000 shares of
common stock and has options for the purchase of 200,000 shares of common stock,
exercisable annually in increments of one-third beginning January 8, 1999.
The selling holders listed above, or persons who obtain common stock or
warrants from selling holders as a gift, on foreclosure of a pledge, in a
distribution or dividend of assets by an entity to its equity holders or in
another private transaction (who also are selling holders for this prospectus)
may sell up to all of the shares of the common stock shown above under the
heading "Shares Offered" and, to the extent the warrants have not yet been
exercised, up to all of the warrants relating to 420,000 of those shares shown
above under the heading "Warrants Offered" pursuant to this prospectus in one or
more transactions from time to time as described below under "Plan of
Distribution." However, the selling holders are not obligated to sell any of the
shares of common stock or warrants offered by this prospectus.
14
<PAGE>
Plan of Distribution
The selling holders may offer and sell the shares of common stock
(including shares they acquired through the exercise of the warrants) offered by
this prospectus and, to the extent the following transactions are available for
the sale of warrants, the warrants offered by this prospectus, from time to time
in one or more of the following transactions:
o through the Nasdaq National Market or any other
securities exchange that quotes the common stock
o in the over-the-counter market
o in transactions other than on such exchanges or in the
over-the-counter Market (including negotiated
transactions, and other private transactions)
o in short sales of the common stock, in transactions to
cover short sales or otherwise in connection with
short sales
o by pledge to secure debts and other obligations or on
foreclosure of a pledge
o through put or call options, including the writing of
exchange-traded call options, or other hedging
transactions related to the common stock
o in a combination of any of the above transactions
The selling holders may sell their shares or warrants at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices. The transactions listed above
may include block transactions.
The selling holders may use broker-dealers to sell their shares or
warrants or may sell their shares or warrants to broker-dealers acting as
principals. If this happens, broker-dealers will either receive discounts or
commissions from the selling holders, or they will receive commissions from
purchasers of shares or warrants for whom they acted as agents, or both. If a
broker-dealer purchases shares or warrants as a principal, it may resell the
shares or warrants for its own account under this prospectus.
We have informed the selling holders that the anti-manipulation
provisions of Regulation M under the Securities Exchange Act of 1934 may apply
to their sales of common stock and warrants.
The selling holders and any agent, broker or dealer that participates
in sales of common stock or warrants offered by this prospectus may be deemed
"underwriters" under the Securities Act of 1933 and any commissions or other
consideration received by any agent, broker or dealer may be considered
underwriting discounts or commissions under the Securities Act. We have agreed
to indemnify selling holders against certain liabilities arising under the
Securities Act of 1933 from sales of common stock or warrants. Selling holders
may agree to indemnify any agent, broker or dealer that participates in sales of
common stock or warrants against liabilities arising under the Securities Act of
1933 from sales of common stock or warrants.
Instead of selling common stock or warrants under this prospectus,
selling holders may sell common stock and warrants in compliance with the
provisions of Rule 144 under the Securities Act of 1933, if available.
The term "selling holders" also includes persons who obtain common
stock or warrants from selling holders as a gift, on foreclosure of a pledge, in
a distribution or dividend of assets by an entity to its equity holders or in
another private transaction.
15
<PAGE>
Description of Capital Stock
The following descriptions provide a summary of our capital stock.
Common Stock
We are authorized to issue 25,000,000 shares of common stock. At May
11, 1999, approximately 7,758,667 shares of common stock were outstanding. The
holders of the common stock have ordinary voting rights for the election of
directors and for other corporate matters. Each share is entitled to one vote.
Holders of common stock do not have cumulative voting rights. As a result, the
holders of a majority of the shares voting for the election of directors can
elect all the directors if they choose to do so. The holders of the common stock
have no preemptive, conversion or redemptive rights, and are not entitled to the
benefits of any sinking fund. The common stock is not assessable. The holders of
common stock are entitled to the dividends that may be declared from time to
time by our board of directors out of funds legally available for dividends.
Preferred Stock
We are authorized to issue 5,000,000 shares of preferred stock. No
shares of preferred stock were outstanding at the date of this prospectus.
Our board of directors has the authority, without stockholder approval,
to issue shares of preferred stock in one or more series, and to determine the
number of shares, powers, designations, preferences, voting powers, dividend
rights, liquidation preferences or conversion or exchange rights, redemption
provisions, sinking fund provisions and other terms of any such series.
We have no present intention to issue shares of preferred stock. The
issuance of shares of preferred stock, or the issuance of rights to purchase
such shares, could be used by an incumbent board of directors to discourage an
unsolicited acquisition proposal. For instance, the issuance of a series of
preferred stock might impede a business combination by including class voting
rights that would enable the holders to block such a transaction. Alternatively,
such an issuance might facilitate a business combination by including voting
rights that would provide a required percentage vote of the stockholders. The
issuance of preferred stock could adversely affect the voting power of the
common stockholders. Although the board of directors is required to make any
determination to issue preferred stock based on its judgment as to the best
interests of the stockholders, the board of directors could act in a manner that
would discourage an acquisition attempt or other transaction that some or a
majority of the stockholders might believe to be in their best interests or in
which stockholders might receive a premium for their stock over the then market
price of such stock. The board of directors does not at present intend to seek
stockholder approval prior to any issuance of currently authorized stock, unless
otherwise required by law or the rules of any market on which our securities are
traded.
Provisions of Delaware law and our charter and bylaws
Delaware law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. The duty of care
requires that, when acting on behalf of the corporation, directors must exercise
an informed business judgment based on all material information reasonably
available to them. Absent the limitations authorized by Delaware law, directors
are accountable to corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty of care.
Delaware law enables corporations to limit available relief to equitable
remedies such as injunction or rescission. Our certificate of incorporation
limits the liability of our directors to us or our stockholders to the fullest
extent permitted by Delaware law. Specifically, our directors will not be
personally liable for monetary damages for breach of a director's fiduciary duty
as a director, except for liability:
o for any breach of the director's duty of loyalty
to us or our stockholders,
16
<PAGE>
o for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation
of law,
o for unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174
of the Delaware General Corporation Law, or
o for any transaction from which the director derived
an improper personal benefit.
This provision in the certificate of incorporation limiting the
liability of directors may reduce the likelihood of derivative litigation
against directors, and may discourage or deter stockholders or management from
bringing a lawsuit against directors for breach of their duty of care, even
though such an action, if successful, might otherwise have benefited us and our
stockholders. The Company's bylaws provide indemnification to our officers and
directors, and we have entered into agreements with each of our directors
providing for indemnification.
Our certificate of incorporation provides that stockholders may act
only at an annual or special meeting of stockholders and may not act by written
consent. Our bylaws provide that special meetings of the stockholders can be
called only by the chairman of the board, the president or a majority of the
board of directors.
Our certificate of incorporation provides that the board of directors
consist of three classes of directors serving for staggered three-year terms. As
a result, approximately one-third of the board of directors is elected each
year. The classified board provision could prevent a party who acquires control
of a majority of the outstanding voting stock from obtaining control of the
board of directors until the second annual stockholders' meeting following the
date the acquiror obtains the controlling interest.
Our certificate of incorporation provides that the number of directors
will be no greater than 12 and no less than three. The certificate of
incorporation further provides that directors may be removed only for cause, and
then only by the affirmative vote of the holders of at least a majority of all
outstanding voting stock entitled to vote. This provision, in conjunction with
the provisions of the certificate of incorporation authorizing the board of
directors to fill vacant directorships, will prevent stockholders from removing
incumbent directors without cause and filling the resulting vacancies with their
own nominees. Our bylaws also provide that the board of directors will include
at least a majority of directors who are not employees. In addition, the bylaws
provide that the Compensation Committee consist solely of members who are not
employees and the Audit Committee include at least a majority of members who are
not employees.
Section 203 of the Delaware General Corporation Law applies to our
company. In general, Section 203 prevents an interested stockholder (defined
generally as a person owning 15% or more of a corporation's outstanding voting
stock) from engaging in a "business combination" with a Delaware corporation for
three years following the date that person became an interested stockholder
unless one of the following applies:
o before such person became an interested stockholder, the board
of directors approved the transaction in which the interested
stockholder became an interested stockholder or approved the
business combination;
o upon consummation of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also
officers of the corporation and by employee stock plans that
do not provide employees with the right to determine
confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer); or
o following the transaction in which such person became an
interested stockholder, the business combination was approved
by the board of directors and authorized at a meeting of
stockholders by the affirmative vote of the holders of
two-thirds of the outstanding voting stock of the corporation
not owned by the interested stockholder.
17
<PAGE>
The restrictions also do not apply to certain business combinations if
both of the following conditions are satisfied:
o the business combination is proposed by an interested
stockholder following the announcement or notification of one
of certain extraordinary transactions involving the
corporation and a person who either
o had not been an interested stockholder during the
previous three years; or
o became an interested stockholder with the approval of
a majority of the corporation's directors
o that extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any
person becoming an interested stockholder during the previous
three years or were recommended for election or elected to
succeed such directors by a majority of such directors.
Stockholder Proposals
Our 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 procedures to be followed
by stockholders in nominating persons for election to the board of directors.
The stockholder's notice must set forth specific information regarding such
stockholder and such business or director nominee. Generally, those advance
notice provisions provide that written notice must be given to the secretary of
the company by a stockholder:
o 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 (with certain exceptions if the date of the
annual meeting is different by more than specified amounts
from the anniversary date)
o in the event of nominations of persons for election to the
board of directors by any stockholder
o 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)
o 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 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.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is American
Securities Transfer & Trust, Inc.
18
<PAGE>
Description of Warrants
Each warrant is exercisable for the purchase of one share of common
stock upon at a price of $5.35 per share. Each warrant is exercisable through
May 6, 2004. We may redeem a warrant at a redemption price of $.01 per warrant,
at any time after any date at which the average daily per share closing price
for the immediately preceding 20 consecutive trading days on the Nasdaq National
Market exceeds $10.70.
The warrants were issued pursuant to a warrant agreement
between Edge Petroleum and the initial purchasers of the warrants. The warrant
agreement may be amended upon the consent of Edge Petroleum and warrantholders
having the right to acquire, by virtue of holding the warrants, at least 50% of
the shares which are issuable upon exercise of the then outstanding warrants.
The shares of common stock issued initially upon exercise of a
warrant will not be registered under the Securities Act of 1933. However, the
offer and sale of those shares by the holder is registered under the Securities
Act by the registration statement to which this prospectus relates.
The warrant agreement requires that each warrantholder,
including a purchaser of warrants pursuant to this prospectus, make specified
representations and agree to the terms of the warrant agreement. These
representations and agreements include the following:
o the warrantholder agrees that the shares issuable upon
exercise of a warrant are acquired for investment and the
warrantholder will not purchase, offer, sell or otherwise
dispose of any of those shares except under circumstances
which will not result in a violation of the Securities Act
of 1933
o in order to exercise a warrant, a warrantholder must be
able to confirm in writing and must confirm in writing, by
signing a certificate to be supplied by Edge Petroleum, all
of the representations and other covenants in the warrant
agreement, including that the warrantholder is an
"accredited investor" as that term is defined in Rule 501(a)
under the Securities Act of 1933
o the shares of common stock initially issued upon exercise of
a warrant will not be registered under the Securities Act
of 1933 and will bear a legend to that effect restricting
the transfer of those shares, as more specifically set forth
in the warrant agreement.
The warrants and the warrant agreement do not confer upon any
warrantholder any rights as a stockholder of Edge Petroleum, including the right
to vote. The warrants and the warrant agreement also do not impose any fiduciary
or other duty on Edge Petroleum, its officers or directors, in favor of any
warrantholder. Each warrantholder agrees that it disclaims and waives all rights
and fiduciary duties owed to stockholders.
The warrants contain provisions to protect the warrantholders
against dilution by adjusting the price at which the warrants are exercisable
and the number of shares issuable upon exercise of the warrants, upon the
occurrence of certain events. These events include: the payment of stock
dividends, and distributions, stock splits, and reclassifications.
19
<PAGE>
Legal Matters
Certain legal matters in connection with the common stock and warrants
offered by this prospectus will be passed on for us, by our outside counsel,
Baker & Botts, L.L.P., Houston, Texas.
Experts
The consolidated financial statements incorporated by reference in this
prospectus from our Annual Report on Form 10-K for the year December 31, 1998
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated in this prospectus by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
Ryder Scott Petroleum Engineers prepared the estimates of oil and
natural gas reserves and discounted present values of estimated future net
revenues incorporated by reference in this prospectus from our Annual Report on
Form 10-K for the year December 31, 1998, and we incorporated those items in
this prospectus in reliance upon the authority of that firm as experts with
respect to those matters.
Where You Can Find More Information
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room. Our SEC filings also are available to the public at the
SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934:
o our Annual Report on Form 10-K for the year ended December 31,
1998;
our Quarterly Report on Form 10-Q for the quarter ended March
31, 1999, as amended by the Form 10-Q/A filed on May 26, 1999;
and
o description of common stock contained in our Registration
Statement on Form 8-A filed on February 14, 1997.
You may obtain a copy of these filings, at no cost, by writing or telephoning:
Michael G. Long
Senior Vice President and Chief Financial Officer
Edge Petroleum Corporation
Texaco Heritage Plaza
1111 Bagby, Suite 2100
Houston, TX 77002
(713) 654-8960
This prospectus is part of a registration statement we filed with the
SEC.
20
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution
All expenses (other than fees and expenses of legal or other advisors
to the selling holders) in connection with the offering described in this
Registration Statement will be paid by the Company. Such expenses are as
follows:*
Securities and Exchange Commission registration fee ..... $ 3,638
Printing expenses ....................................... 1,000
Accounting fees and expenses ............................ 15,000
Legal fees and expenses ................................. 20,000
Miscellaneous ........................................... 2,362
-------
Total ................................................ $42,000
=======
- ----------
* The amounts set forth, except for the filing fees for the Securities and
Exchange Commission, are estimated.
ITEM 15. Indemnification of Directors and Officers
Delaware General Corporation Law
Section 145(a) of the General Corporation Law of the State of Delaware
(the "DGCL") provides that a corporation may indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement or
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 145(b) of the DGCL states that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses that the Court of Chancery or such other court shall
deem proper.
Section 145(c) of the DGCL provides that to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorney's
fees) actually and reasonably incurred by him in connection therewith.
II-1
<PAGE>
Section 145(d) of the DGCL states that any indemnification under
subsections (a) and (b) of Section 145 (unless ordered by a court) shall be made
by the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in subsections (a) and (b). Such determination shall be made (1) by the
board of directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding or (2) if such a quorum is
not obtainable or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion or (3) by the
stockholders.
Section 145(e) of the DGCL provides that expenses (including attorney's
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it ultimately is determined that he is not
entitled to be indemnified by the corporation as authorized in Section 145. Such
expenses (including attorney's fees) incurred by other employees and agents may
be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
Section 145(f) of the DGCL states that the indemnification and
advancement of expenses provided by, or granted pursuant to, the other
subsections of Section 145 shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in this official capacity and as to action in
another capacity while holding such office.
Section 145(g) of the DGCL provides that a corporation shall have the
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of Section 145.
Section 145(j) of the DGCL states that the indemnification and
advancement of expenses provided by, or granted pursuant to, Section 145 shall,
unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Certificate of Incorporation
The Certificate of Incorporation of the Company provides that a
director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. If the DGCL is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Company, in addition to the limitation on
personal liability described above, shall be limited to the fullest extent
permitted by the amended DGCL. Further, any repeal or modification of such
provision of the Restated Certificate of Incorporation by the stockholders of
the Company shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Company existing at
the time of such repeal or modification.
Bylaws
The Bylaws of the Company provide that each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was or has agreed to become a director or officer of the
Company or is or was serving or has agreed to serve at the request of the
Company as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such
II-2
<PAGE>
proceeding is alleged action in an official capacity as a director or officer or
in any other capacity while serving or having agreed to serve as a director or
officer, shall be indemnified and held harmless by the Company to the fullest
extent authorized by the DGCL, as the same exists or may thereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than said law
permitted the Company to provide prior to such amendment) against all expense,
liability and loss (including, without limitation, attorney's, fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to serve in the capacity which initially entitled such person to indemnity
thereunder, and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that the Company shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the board of directors of the Company. The Bylaws further provide
that the right to indemnification conferred thereby shall be a contract right
and shall include the right to be paid by the Company the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the DGCL requires, the payment of such expenses incurred by a
current, former or proposed director or officer in his or her capacity as a
director or officer or proposed director or officer (and not in any other
capacity in which service was or is or has been agreed to be rendered by such
person while a director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to the Company of an undertaking, by or on
behalf of such indemnified person, to repay all amounts so advanced if it shall
ultimately be determined that such indemnified person is not entitled to be
indemnified under the Bylaws or otherwise. In addition, the Bylaws provide that
the Company may, by action of its board of directors, provide indemnification to
employees and agents of the Company, individually or as a group, with the same
scope and effect as the indemnification to employees and agents of the Company,
individually or as a group, with the same scope and effect as the
indemnification of directors and officers provided for in the Bylaws.
The Bylaws include related provisions meant to facilitate the
indemnitee's receipt of such benefits. These provisions cover, among other
things: (i) specification of the method of determining entitlement to
indemnification and the selection of independent counsel that will in some cases
make such determination; (ii) specification of certain time periods by which
certain payments or determinations must be made and actions must be taken; and
(iii) the establishment of certain presumptions in favor of an indemnitee. The
benefits of certain of these provisions are available to an indemnitee only if
there has been a change in control (as defined therein).
Indemnification Agreements
The Company has entered into Indemnification Agreements with each of
its directors. The Indemnification Agreements provide that the Company shall
indemnify the director and hold him harmless from any losses and expenses which,
in type or amount, are not insured under the directors and officers' liability
insurance maintained by the Company, and generally indemnifies the director
against losses and expenses as a result of a claim or claims made against him
for any breach of duty, neglect, error, misstatement, misleading statement,
omission or other act done or wrongfully attempted by the director or any of the
foregoing alleged by any claimant or any claim against the director solely by
reason of him being a director or officer of the Company, subject to certain
exclusions. The Indemnification Agreements also provide certain procedures
regarding the right to indemnification and for the advancement of expenses.
Insurance
The Company has a policy of liability insurance to insure its officers
and directors against losses resulting from certain acts committed by them in
their capacities as officers and directors of the Company.
II-3
<PAGE>
ITEM 16. Exhibits
Exhibit No. Document
---------- --------
*2.1 -- Amended and Restated Combination Agreement by and among (i)
Edge Group II Limited Partnership, (ii) Gulfedge Limited
Partnership, (iii) Edge Group Partnership, (iv) Edge Petroleum
Corporation, (v) Edge Mergeco, Inc. and (vi) the Company, dated as
of January 13, 1997 (Incorporated by reference from exhibit 2.1 to
the Company's Registration Statement on Form S-4 (Registration No.
333-17269)).
*4.1 -- Restated Certificate of Incorporated of the Company, as amended
(Incorporated by reference from exhibit 3.1 to the Company's
Registration Statement on Form S-4 (Registration No. 333-17269)).
*4.2 -- Bylaws of the Company (Incorporated by reference from exhibit
3.2 to the Company's egistration Statement on Form S-4
(Registration No. 333-17269)).
*4.3 -- Amended and Restated Credit Agreement, dated April 1, 1998, by
and between Edge Petroleum Corporation and Edge Petroleum
Exploration Company (collectively the "Borrower") and Compass
Bank, a Texas state chartered banking institution, as Agent for
itself and First National Bank of Chicago and other lenders party
thereto. (Incorporated by reference from exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for, the quarterly period
ended March 31, 1998).
*4.4 -- First Amendment dated September 29, 1998 to the Amended and
Restated Credit Agreement, dated as of April 1, 1990, by and
between the Borrower and the First National Bank of Chicago as
agent and a Lender thereto (Incorporated by reference from exhibit
4.1 to the Company's Quarterly Report on Form 10-Q for, the
quarterly period ended September 30, 1998).
*4.5 -- Security Agreement, dated as of April 1, 1998, by and between
the Borrower and Compass Bank, a Texas state chartered banking
institution, as Agent for itself and The First National Bank of
Chicago and other lenders party thereto the Credit Agreement
(Incorporated by reference from exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for, the quarterly period ended
March 31, 1998).
*4.6 -- Security Agreement (Stock Pledge), dated as of April 1, 1998,
by and between Edge Petroleum Corporation and Compass Bank, a
Texas state chartered banking institution, as Agent for itself and
The First National Bank of Chicago and other lenders party thereto
the Credit Agreement (Incorporated by reference from exhibit 4.3
to the Company's Quarterly Report on Form 10-Q for, the quarterly
period ended March 31, 1998).
*4.7 -- First Amendment dated March 1, 1999 to the Amended and
Restated Credit Agreement dated April 1, 1998 by and between the
Borrower and the First National Bank of Chicago as agent and a
Lender thereto (Incorporated by reference from exhibit 4.6 to the
Company's Amendment to Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999).
*4.8 -- Form of Stock Certificate (Incorporated by reference from
exhibit 4.1 to the Company's Registration Statement on Form S-4
(Registration No. 333-17269)).
*4.9 -- Common Stock Subscription Agreement dated as of April 30, 1999
between the Company and the purchasers named therein (Incorporated
by reference from exhibit 4.5 to the Company's Amendment to
Quarterly Report on Form 10-Q for the quarter ended March 31,
1999).
*4.10 -- Warrant Agreement dated as of May 6, 1999 between the Company
and the warrantholders named therein (Included in and incorporated
by reference from exhibit 4.5 to the Company's Amendment to
Quarterly Report on Form 10-Q for the quarter ended March 31,
1999).
*4.11 -- Form of Warrant for the purchase of the Common Stock (Included
in and incorporated by reference from the Common Stock
Subscription Agreement appearing as exhibit 4.5 to the Company's
Amendment to Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999).
-- The Company is a party to several debt instruments under
which the total amount of securities authorized does not exceed
10% of the total assets of the Company and its subsidiaries on a
consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b)
of Regulation S-K, the Company agrees to furnish a copy of such
instruments to the Commission upon request.
II-4
<PAGE>
5 -- Opinion of Baker & Botts, L.L.P. with respect to the legality of
securities.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of Ryder Scott Company Petroleum Engineers
23.3 -- Consent of Baker & Botts, L.L.P. (contained in Exhibit 5.1).
24 -- Power of Attorney (included on the signature page of the
registration statement).
--------------
* Incorporated by reference as indicated.
II-5
<PAGE>
ITEM 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)
(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) of
the Securities Act if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8 and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effectiv amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, the State of Texas, on June 1, 1999.
EDGE PETROLEUM CORPORATION
By: /s/ Michael G. Long
--------------------------
Name: Michael G. Long
Title: Senior Vice President
and Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints James D. Calaway,
Michael G. Long and Robert Thomas and each of them, each of whom may act without
the joinder of the others, as his true and lawful attorneys-in-fact and agents,
will full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto and all other documents in connection
therewith, with the Commission, granting unto said attorneys-in-fact and agents
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully and for all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities indicated on June 1, 1999.
Signature Title
--------------- -----------
/S/ John W. Elias Chief Executive Officer and
- -------------------------- Chairman of the Board
(John W. Elias) (Principal Executive Officer)
/s/ Michael G. Long Senior Vice President and
- -------------------------- Chief Financial Officer
(Michael G. Long) (Principal Financial Officer)
/s/ Brian C. Baumler Controller and Treasurer
- -------------------------- (Principal Accounting Officer)
(Brian C. Baumler)
/s/ James D. Calaway President and Chief
- -------------------------- Operations Officer and
(James D. Calaway) Director
II-7
<PAGE>
/S/ Vincent Andrews
- -------------------------- Director
Vincent Andrews
/S/ David B. Benedict
- -------------------------- Director
David B. Benedict
/S/ Nils P. Peterson
- -------------------------- Director
Nils P. Peterson
/S/ Stanley S. Raphael
- -------------------------- Director
Stanley S. Raphael
/S/ Robert W. Shower
- -------------------------- Director
Robert W. Shower
/S/ John Sfondrini
- -------------------------- Director
John Sfondrini
/S/ Willaim H. White
- -------------------------- Director
William H. White
II-8
June 1, 1999
Edge Petroleum Corporation
1111 Bagby
Suite 2100
Houston, Texas 77002
Ladies and Gentlemen:
As set forth in the Registration Statement on Form S-3 (the "Registration
Statement") to be filed by Edge Petroleum Corporation, a Delaware corporation
(the "Company"), with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended, relating to the proposed sale from
time to time, of (i) up to 1,820,000 shares (the "Offered Shares") of common
stock, par value $.01 per share, of the Company (the "Common Stock"), including
420,000 shares (the "Warrant Shares"), of Common Stock issuable upon exercise of
the Warrants (as hereinafter defined), and (ii) up to 420,000 warrants each for
the purchase of one share of Common Stock (the "Warrants" and, together with the
Offered Shares, the "Securities"), certain legal matters in connection with the
Securities are being passed upon for the Company by us. At your request, this
opinion is being furnished to you for filing as Exhibit 5 to the Registration
Statement.
The Warrants are exercisable to acquire the Warrant Shares pursuant to the
terms and conditions set forth in Warrant Agreement dated as of May 6, 1999
between the Company and the purchasers named therein, which was filed as Exhibit
4.10 to the Registration Statement, and the Warrants, a form of which was filed
as Exhibit 4.11 to the Registration Statement. In our capacity as your counsel
in the connection referred to above, we have examined the Restated Certificate
of Incorporation and the Bylaws of the Company, each as amended to date, and the
originals, or copies certified or otherwise identified, of corporate records of
the Company, certificates of public officials and of representatives of the
Company, statutes and other instruments or documents, as a basis for the opinion
hereinafter expressed. In giving such opinion, we have relied upon certificates
of officers of the Company with respect to the accuracy of the material factual
matters contained in such certificates. In making our examination, we have
assumed that all signatures on all documents examined by us are genuine, that
all documents submitted to us as originals are accurate and complete, that all
documents submitted to us as copies are true and correct copies of the originals
thereof and that all information submitted to us was accurate and complete.
<PAGE>
On the basis of the foregoing, we are of the opinion that:
1.The Securities are duly authorized;
2.The Securities (other than the Warrant Shares) have been validly
issued, and are fully paid and are nonassessable; and
3.If and when issued to holders of Warrants directly upon exercise
thereof in accordance with all the terms and conditions set forth in the
Warrants, the Warrant Shares will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to our Firm under the caption "Legal
Matters" in the prospectus included in the Registration Statement. In giving
such consent, we do not thereby concede that we are within the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/S/ Baker & Botts, L.L.P.
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Edge Petroleum Corporation on Form S-3 of our report dated March 26, 1999
appearing in the Annual Report on Form 10-K of Edge Petroleum Corporation for
the year ended December 31, 1998 and to the reference to us under the heading
"Experts" in the Prospectus, which is a part of this Registration Statement.
/S/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Houston, Texas
June 1, 1999
EXHIBIT 23.2
Consent of Independent Petroleum Engineers
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our summary report dated March 26, 1999 included as
Exhibit 99.1 to the Annual Report on Form 10-K of Edge Petroleum Corporation for
the year ended December 31, 1998 and the data extracted from our reports and the
references to our firm appearing in "Items 1 and 2. Business and Properties"
under the caption "Oil and Gas Reserves" and in Supplemental Financial
Information on Oil and Natural Gas Exploration, Development and Production
Activities (unaudited) in such Annual Report on Form 10-K.
We also consent to the reference to us under the heading "Experts" is this
prospectus, which is a part of this Registration Statement.
/S/ RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Houston, Texas
June 1, 1999
