<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. 1)
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
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Castle Energy Corporation
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Richard E. Staedtler
-----------------------------------------------------------------------------
(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>
[CEC LETTERHEAD AND LOGO]
March 12, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting ("Annual Meeting") of
Stockholders of Castle Energy Corporation (the "Company") to be held on
Wednesday, April 23, 1997, at 9:30 A.M., Eastern Daylight Time, at Doubletree
Guest Suites, 640 West Germantown Pike, Plymouth Meeting, Pennsylvania.
At the Annual Meeting, you will be asked to consider and vote upon two
matters, a proposal to elect the nominee named in the accompanying Proxy
Statement as Director to serve for the period indicated and a proposal to
appoint KPMG Peat Marwick LLP as the Company's independent accountants for the
fiscal year ending September 30, 1997.
Whether or not you are personally able to attend the Annual Meeting, please
complete, sign, date, and return the enclosed proxy as soon as possible. This
action will not limit your rights to vote in person if you wish to attend the
Annual Meeting.
Sincerely,
/s/ JOSEPH L. CASTLE II
------------------------------------
Joseph L. Castle II
Chairman and Chief Executive Officer
<PAGE>
CASTLE ENERGY CORPORATION
Notice of Annual Meeting of Stockholders
to be held on April 23, 1997
March 12, 1997
To The Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Castle Energy Corporation, a Delaware corporation (the
"Company"), will be held at Doubletree Guest Suites, 640 West Germantown Pike,
Plymouth Meeting, Pennsylvania, on Wednesday, April 23, 1997 at 9:30 A.M.,
Eastern Daylight Time, for the following purposes:
1. To elect the nominee named in the Proxy Statement as Director to serve
for the period indicated or until his successor has been elected.
2. To consider and take action upon a proposal to appoint KPMG Peat
Marwick LLP as the Company's independent accountants for the fiscal year ending
September 30, 1997.
3. To transact any other business as may properly come before the Annual
Meeting.
Stockholders of record at the close of business on March 3, 1997 will be
entitled to vote at the Annual Meeting.
The Company's Annual Report to Stockholders for the fiscal year ended
September 30, 1996 and quarterly report for the quarter ended December 31, 1996
accompanies the enclosed Proxy Statement.
A complete list of stockholders entitled to vote at the Annual Meeting
will be kept at the office of the Company, One Radnor Corporate Center, Suite
250, 100 Matsonford Road, Radnor, Pennsylvania 19087, for examination by any
Stockholder, during ordinary business hours, for a period of not less than ten
days prior to the Annual Meeting.
By Order of the Board of Directors
/s/ JOSEPH L. CASTLE II
-------------------------------------
Joseph L. Castle II
Chairman and Chief Executive Officer
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN
THE SELF-ADDRESSED RETURN ENVELOPE FURNISHED FOR THAT PURPOSE AS
PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON,
YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY
STATEMENT.
<PAGE>
PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
April 23, 1997
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of Castle
Energy Corporation, a Delaware corporation (the "Company"), to be voted at the
Annual Meeting of Stockholders to be held on April 23, 1997 and any adjournment
or adjournments thereof (the "Annual Meeting"). When such proxy is properly
executed and returned, the shares of the Company's Common Stock, par value $.50
per share ("Common Stock"), it represents will be voted at the Annual Meeting as
directed. If no specification is indicated, the shares will be voted "FOR" the
election of the nominee to serve as Director for the term designated and "FOR"
the appointment of KPMG Peat Marwick LLP as the Company's independent
accountants for the fiscal year ending September 30, 1997. Any stockholder
granting a proxy has the power to revoke it at any time prior to its exercise by
notice of revocation to the Company in writing, by voting in person at the
Annual Meeting, or by execution of a later dated proxy; provided, however, that
such action is taken in sufficient time to permit the necessary examination and
tabulation of the subsequent proxy or revocation before the vote is taken.
The shares entitled to vote at the Annual Meeting consist of shares of
Common Stock, with each holder of record as of the close of business on March 3,
1997 (the "Record Date") entitled to one vote for each such share held. As of
the Record Date there were 5,827,946 shares of Common Stock outstanding and
entitled to vote at the Annual Meeting. This Proxy Statement and accompanying
proxy are being sent to stockholders of the Company on or about March 15, 1997.
The address of the Company's principal executive offices is One Radnor
Corporate Center, Suite 250, 100 Matsonford Road, Radnor, Pennsylvania 19087,
and the telephone number is (610) 995-9400.
-1-
<PAGE>
TABLE OF CONTENTS
Page
----
INTRODUCTION............................................................ 1
PRINCIPAL HOLDERS OF VOTING SECURITIES.................................. 3
SECURITY OWNERSHIP OF MANAGEMENT........................................ 4
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES......................... 5
EXECUTIVE COMPENSATION.................................................. 7
Summary Compensation................................................ 7
Option Grants in Last Fiscal Year (Year Ended September 30, 1996)... 7
Option/SAR Exercises and Option/SAR Values.......................... 7
Employment Agreements............................................... 8
Severance Agreements................................................ 8
1992 Executive Equity Incentive Plan................................ 8
Pension Plans....................................................... 9
401(k) Plan......................................................... 9
Section 16 Compliance............................................... 9
Compensation Committee Interlocks and Insider Participation......... 10
Board Compensation Committee Report on Executive Compensation....... 10
Performance Graph................................................... 12
BOARD OF DIRECTORS AND BOARD COMMITTEES................................. 14
Fiscal 1996 Board Meetings.......................................... 14
Board Committees.................................................... 14
Compensation of Directors........................................... 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:......................... 15
TRANSACTIONS WITH MANAGEMENT AND OTHERS............................. 15
Legal Fees....................................................... 15
Management Fees.................................................. 15
Exercise/Discharge of SARs....................................... 15
PROPOSAL TO ELECT DIRECTOR.............................................. 16
PROPOSAL TO APPOINT INDEPENDENT ACCOUNTANTS............................. 17
OTHER MATTERS........................................................... 17
VOTE REQUIRED........................................................... 17
STOCKHOLDER PROPOSALS................................................... 17
EXPENSES OF SOLICITATION................................................ 18
-2-
<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth, as of March 3, 1997, the names of all
persons who were known by the Company to be the beneficial owners (as defined in
the rules of the Securities and Exchange Commission (the "Commission")), of more
than five percent of the shares of Common Stock of the Company:
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership(1) Class(1)
- ------------------------------------ ----------------------- ----------
<S> <C> <C>
FMR Corp. 988,750(2) 16.97%
82 Devonshire Street
Boston, Massachusetts 02109
Joseph L. Castle II and Sally W. Castle 548,008(3) 9.24%
One Radnor Corporate Center, Suite 250
100 Matsonford Road
Radnor, Pennsylvania 19087
Brandywine Asset Management, Inc. 415,300(4) 7.13%
3 Christina Center, 201 N. Walnut Street
Wilmington, Delaware 19801
Corbyn Investment Management, Inc. 587,475(5) 10.08%
Suite 108
2330 W. Joppa Road
Lutherville, Maryland 21093
</TABLE>
- ---------------
(1) Based on a total of 5,827,946 shares of Common Stock issued and
outstanding as of March 3, 1997. In calculating each respective holder's
percentage ownership and beneficial ownership in the table above, shares
of Common Stock which the holder has the right to acquire within 60 days
are included.
(2) These shares are beneficially owned by Fidelity Management & Research
Company as a result of its serving as investment adviser to various
investment companies registered under Section 8 of the Investment Company
Act of 1940 and as investment adviser to certain other funds which are
generally offered to limited groups of investors. Based on information
furnished by stockholder as of December 31, 1996, the most recent date as
of which such information was so furnished.
(3) Joseph L. Castle II and Sally W. Castle are husband and wife. As such,
each is deemed to beneficially own 548,008 shares of Common Stock.
Includes (a) 410,733 shares of Common Stock owned by Mr. Castle and 37,275
shares of Common Stock owned by Mrs. Castle; (b) 67,500 shares of Common
Stock issuable upon exercise of options which are exercisable within 60
days by Mr. Castle at $6.00 per share and (c) 32,500 shares of Common
Stock issuable upon exercise of options which are exercisable within 60
days by Mr. Castle at $12.25 per share.
(4) Based on information furnished by stockholder as of February 28, 1997, the
most recent date as of which such information was so furnished.
(5) These shares are beneficially owned by a group consisting of Corbyn
Investment Management, Inc., an investment adviser registered under the
Investment Advisers Act of 1940 and Greenspring Fund, Inc., an investment
company registered under the Investment Company Act of 1940 and for which
Corbyn Investment Management, Inc. serves as investment adviser. Based
upon information furnished by stockholder as of December 31, 1996.
-3-
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 3, 1997, the shares of Common
Stock beneficially owned by each of the Company's Chief Executive Officer and
the two other executive officers of the Company whose annual salary and bonus
exceeded $100,000 for the fiscal year ended September 30, 1996 (the "Named
Executives"), by each Director and nominee for Director of the Company and by
the Directors, nominee and executive officers of the Company as a group, with
sole voting and investment power unless otherwise indicated:
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership (1) Class (1)(2)
- ------------------------ ------------------------ -------------
<S> <C> <C>
Joseph L. Castle II.................................. 548,008(3) 9.24%
William S. Sudhaus .................................. 10,000(4)
Richard E. Staedtler................................. 37,550(5)
Ryk J. Holden........................................ 25,000(6)
Martin R. Hoffmann................................... 7,000(7)
Sidney F. Wentz...................................... 5,000(8)
John P. Keller....................................... 0
All Directors, Nominee and Executive Officers
as a group (8 persons)............................... 637,783 10.60%
</TABLE>
- -------------
(1) Based on a total of 5,827,946 shares of Common Stock issued and
outstanding as of March 3, 1997. In calculating each respective holder's
percentage ownership and beneficial ownership in the table above, shares
of Common Stock which the holder has the right to acquire within 60 days
are included.
(2) Percentages of less than one percent are omitted.
(3) Joseph L. Castle II and Sally W. Castle are husband and wife. As such,
each is deemed to beneficially own 548,008 shares of Common Stock.
Includes (a) 410,733 shares of Common Stock owned by Mr. Castle and 37,275
shares of Common Stock owned by Mrs. Castle; (b) 67,500 shares of Common
Stock issuable upon exercise of options which are exercisable within 60
days by Mr. Castle at $6.00 per share; and (c) 32,500 shares of Common
Stock issuable upon exercise of options which are exercisable within 60
days by Mr. Castle at $12.25 per share.
(4) Represents (a) 5,000 shares of Common Stock issuable upon exercise of
options which are exercisable within 60 days by Mr. Sudhaus at $11.00 per
share and (b) 5,000 shares of Common Stock issuable upon exercise of
options which are exercisable within 60 days by Mr. Sudhaus at $11.25 per
share.
(5) Represents 37,500 shares of Common Stock issuable upon exercise of options
which are exercisable within 60 days at $13.125 per share and 50 shares of
Common Stock owned by Mr. Staedtler.
(6) Represents shares of Common Stock issuable upon exercise of options which
are exercisable within 60 days by Mr. Holden at $11.25 per share.
(7) Represents (a) 5,000 shares of Common Stock issuable upon exercise of
options which are exercisable within 60 days by Mr. Hoffmann at $11.25 and
b) 2,000 shares owned by an individual retirement account for the benefit
of Mr. Hoffmann.
(8) Represents shares of Common Stock issuable upon exercise of options which
are exercisable within 60 days by Mr. Wentz at $11.25 per share.
-4-
<PAGE>
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The Directors and executive officers of the Company and its significant
subsidiaries are as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- -----------
<S> <C> <C>
Directors of the Company
- ------------------------
Joseph L. Castle II .................... 64 Chairman of the Board and Chief Executive Officer of the
Company
William S. Sudhaus...................... 48 Director
Sidney F. Wentz......................... 64 Director
Martin R. Hoffmann...................... 64 Director
John P. Keller.......................... 57 Nominee for Director
Executive Officer of the Company
- --------------------------------
Richard E. Staedtler.................... 52 Senior Vice President, Chief Financial Officer and Chief
Accounting Officer of the Company
Executive Officers of Significant
Subsidiaries of the Company
- ----------------------------------
Ryk J. Holden........................... 38 President of CEC Gas Marketing L.P. ("Marketing"), a
wholly-owned subsidiary of the Company
Harold W. Hawkins....................... 46 President of Castle Texas Pipeline L.P. ("Pipeline") and
Castle Texas Production L.P. ("Production"), wholly-
owned subsidiaries of the Company
Timothy M. Murin........................ 41 President of Castle Exploration Company, Inc ("CECI"),
a wholly-owned subsidiary of the Company
</TABLE>
A description of the business experience of each of the directors,
executive officers of the Company and executive officers of significant
subsidiaries of the Company is as follows:
Directors of the Company
Joseph L. Castle II has been a Director of the Company since 1985. Mr.
Castle is the Chairman of the Board of Directors and Chief Executive Officer of
the Company, having served as Chairman from December 1985 through May 1992 and
since December 20, 1993. Mr. Castle also served as President of the Company from
December 1985 through December 20, 1993 when he reassumed his position as
Chairman of the Board. Mr. Castle has worked in the energy industry in various
capacities since 1971. Mr. Castle is a director of Comcast Corporation, and Mark
Centers Trust, a real estate investment trust, and Chairman of the Board of
Charming Shoppes, Inc.
William S. Sudhaus has been a director of the Company since February 1993.
Mr. Sudhaus served as Executive Vice President of the Company since February
1993 and as President and Chief Operating Officer of the Company since December
1993. In addition, Mr. Sudhaus served as the Chairman and Chief Executive
Officer of Indian Refining Limited Partnership ("IRLP"). Mr. Sudhaus also served
as Chairman and Chief Executive Officer of Powerine Oil Company ("Powerine")
from October 1993 to February 1995. Mr. Sudhaus was also the Chairman and Chief
Executive Officer of CORE Refining Corporation ("CORE") from March 1995. See
"Certain Relationships and Related Transactions." Effective January 1, 1996, Mr.
Sudhaus resigned from all positions with the Company and its subsidiaries except
that of Director of the Company and formed TALON Resources Corporation. Mr.
Sudhaus is currently President of TALON Resources Corporation. Mr. Sudhaus is
not standing for reelection as a Director at the Annual Meeting. (See "Certain
Relationships and Related Transactions - Transactions with Management and
Others".)
-5-
<PAGE>
Sidney F. Wentz has been a director of the Company since June 1995. Mr.
Wentz has been Chairman of the Board of The Robert Wood Johnson Foundation, the
nation's largest health care philanthropy, since June 1989. Commencing in 1967,
he held several positions with Crum and Forster, an insurance holding company,
retiring as Chairman and Chief Executive Officer in 1988. Previously, he was an
attorney with the law firm of White & Case and then Corporate Attorney for
Western Electric Company/AT&T. Mr. Wentz is a director of Ace Limited, a
Bermuda-based insurance company, and a trustee for Morristown Memorial Hospital
and Drew University.
Martin R. Hoffmann has been a director of the Company since June 1995. Mr.
Hoffmann is of counsel to the Washington, D.C. office of the law firm of
Skadden, Arps, Slate, Meagher & Flom LLP. He has been a Senior Visiting Fellow
at the Center for Technology, Policy and Industrial Development of the
Massachusetts Institute of Technology since 1993 and a private business
consultant since 1993. From 1989 to 1993, Mr. Hoffmann served as Vice President
and General Counsel of Digital Equipment Corporation. Prior to assuming this
position, Mr. Hoffmann practiced law as Managing Partner of the Washington, D.C.
office of Gardner, Carton and Douglas from 1977 to 1989. Mr. Hoffmann also
served in various capacities at the United States Department of Defense,
including General Counsel from 1974 to 1975 and Secretary of the Army from 1975
to 1977. He is a Director of Sea Change Technology, Inc. of Maynard,
Massachusetts and Mitretek Systems of McLean, Virginia.
John P. Keller is the nominee for director whose term will expire at the
2000 Annual Meeting. Since 1972, Mr. Keller has served as the President of
Keller Group, Inc., a privately-held corporation with subsidiaries in Ohio,
Pennsylvania and Virginia. In 1993 and 1994 Mr. Keller also served as the
Chairman of American Appraisal Associates, an appraisal company. Mr. Keller is
also a director of A.M. Castle & Co. and Old Kent Financial Corporation.
Executive Officer of the Company
Richard E. Staedtler has been Senior Vice President and Chief Financial
Officer of the Company since November 1994. Mr. Staedtler served as a Director
of the Company from 1986 through September 1992, and as Chief Financial Officer
of the Company from 1984 through June 1993, when he formed Terrapin Resources,
Inc. ("Terrapin") to purchase Minden Energy Corporation, then a wholly-owned
subsidiary of the Company. Mr. Staedtler also serves as President of Terrapin,
which provides certain administrative services to the Company. See "Certain
Relationships and Related Transactions -- Transactions with Management and
Others."
Executive Officers of Significant Subsidiaries of the Company
Ryk J. Holden was President of Marketing, a wholly-owned subsidiary of the
Company engaged in gas marketing and gas merchant activities. Mr. Holden became
President of Marketing in January 1995. From February 1993 until January 1995,
Mr. Holden was a Vice President of Business Development and Supply of MG Natural
Gas Corp. ("MGNG"), a subsidiary of Metallgesellschaft Corp. ("MG") and
President of MG Gathering Corp. ("MGG"), an indirect subsidiary of MG. From
December 1987 through January 1993, Mr. Holden held various positions with ENRON
Corp. In January 1997 Mr. Holden resigned.
Harold W. Hawkins became President of Pipeline in July 1995 and President
of Production in January 1997. From December 1992 until July 1995, Mr. Hawkins
was the Manager of Operations for MGG. From 1972 until 1993, Mr. Hawkins was
employed in various supervisory roles by Atlantic Richfield Company ("ARCO").
Timothy M. Murin has been the President of Castle Exploration Company,
Inc., a wholly-owned exploration and production subsidiary ("CECI") since June
1993. From August 1986 to June 1993, Mr. Murin served as the Vice President -
Exploration and Production of CECI.
-6-
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation
The following table summarizes all compensation earned by the Named
Executives for the Company's fiscal years ending September 30, 1994, 1995 and
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Securities
Fiscal Year Annual Compensation Underlying All Other
Ended ----------------------- Options/ Compensation
Name and Principal Position September 30, Salary($) Bonus($) SARs(#) ($)
- ----------------------------- ------------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Joseph L. Castle II.............. 1996 $356,250 $7,125(1)
Chairman of the Board, 1995 415,625 $ 59,375 4,015(1)
Chief Executive Officer and 1994 416,667 285,000 6,000(2)
Director of the Company
Richard E. Staedtler (3)......... 1996 192,500 25,000 3,000(1)
Chief Financial Officer 1995 157,084 50,000
Chief Accounting Officer 1994
Ryk J. Holden (3)................ 1996 157,534 5,000
President of Marketing 1995 103,135 25,000
1994
</TABLE>
- ---------------------
(1) Represents Company matching contributions under the Company's 401(k) Plan.
(2) Directors' fees.
(3) Mr. Staedtler was the Chief Financial Officer of the Company until June
30, 1993. He rejoined the Company in that same capacity in November 1994.
Mr. Holden joined Marketing in January 1995 and resigned in January 1997.
Option Grants in Last Fiscal Year (Year Ended September 30, 1996)
No options were granted to Named Executives during the fiscal year ended
September 30, 1996.
Option/SAR Exercises And Option/SAR Values
The following table shows the total number of unexercised options and SARs
held at September 30, 1996 by such Named Executives. The table also shows the
values for unexercised "in-the-money" options which represent the positive
spread between the exercise price of such stock options and the fair market
value of the shares of Common Stock as of September 30, 1996 which was $8.625
per share. No SAR's were outstanding at September 30, 1996. No options were
exercised by the Named Executives during the year ended September 30, 1996.
-7-
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
at Fiscal Year-End at Fiscal Year-End
(September 30, 1996) (September 30, 1996)
Shares Value (#) ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
---- -------------- ----- --------------- ------------------
<S> <C> <C> <C> <C>
Joseph L. Castle II 0 -- 100,000/- $177,188/-
Richard E. Staedtler 0 -- 25,000/25,000 -/-
Ryk J. Holden 0 -- 12,500/12,500 -/-
</TABLE>
Employment Agreements
Under the terms of his expired employment agreement, Mr. Joseph L. Castle
II, Chairman and Chief Executive Officer, is entitled to a retirement benefit.
At September 30, 1996, the book value of such retirement benefit is $848,000.
Effective January 30, 1995, the Company entered into an employment
agreement with Mr. Holden pursuant to which Mr. Holden agreed to serve as an
executive officer of the Company or its subsidiaries with respect to its natural
gas supply and marketing functions. This agreement provides Mr. Holden with
annual compensation at the rate of $155,000 per year plus cost of living
increases and Mr. Holden is eligible for discretionary bonuses, if any, to be
determined by the Company's Board of Directors. In January 1997, Mr. Holden
resigned. Pursuant to a letter agreement governing his severance, Mr. Holden
received $165,000 and free use of a company office for a period of six months.
In return Mr. Holden agreed to provide up to 100 hours of transitional
assistance to the Company.
Severance Agreements
The Company entered into severance agreements with all three of its Named
Executives in June 1996 during the period when the Company sought to sell its
assets to outside parties. Pursuant to the terms of such severance agreements,
each officer was entitled to severance compensation in the event the Company
sold substantially all of its assets and the purchaser did not retain the Named
Executive Officer. In the case of Messrs. Castle and Staedtler, who do not have
employment agreements with the Company, severance compensation under such
circumstances is equal to one-month's salary for each full year of service with
the Company or its subsidiaries. Mr. Castle's severance agreement also includes
a provision requiring the Company to pay Mr. Castle's retirement benefit in a
lump sum if the Company's assets are sold and he is terminated. Mr. Staedtler's
severance agreement contains a provision that the Company pay to Terrapin the
remaining amounts due to it under its management contract with Production,
discounted at ten percent (10%), in the event substantially all of the Company's
assets are sold. (See "Certain Relationships and Related Transactions -
Transactions with Management and Others.")
1992 Executive Equity Incentive Plan ("Incentive Plan")
The Company established the 1992 Executive Equity Incentive Plan (the
"Incentive Plan") to increase the ownership of Common Stock of the Company by
those key employees (including officers and Directors who are employees) and
Directors who are not employees of the Company or its subsidiaries ("Outside
-8-
<PAGE>
Directors") who contribute to the continued growth, development and financial
success of the Company and its subsidiaries, and to attract and retain key
employees and Directors and reward them for the Company's profitable
performance.
The Incentive Plan provides that an aggregate of 562,500 shares of Common
Stock will be available for awards in the form of stock options, including
incentive stock options and nonqualified stock options, generally at prices at
or in excess of market price on the date of grant. As of March 3, 1997, options
to purchase 177,500 shares of Common Stock under the Incentive Plan were
outstanding of which 109,250 were exercisable.
Unexercised options terminate one year after a grantee's termination of
employment by death or permanent disability, and 90 days after normal
retirement. If a grantee's employment is terminated for any reason other than by
death, retirement or permanent disability, any options of such grantee
exercisable as of the date of such termination must be exercised within three
months.
The Incentive Plan is administered by the Compensation Committee. During
the fiscal year ended September 30, 1996, the Compensation Committee awarded
20,000 options. Theses consisted of options to purchase 5,000 shares of common
stock at $8.44 per share, to an executive officer of a subsidiary of the Company
and options to purchase 15,000 shares of common stock at $11.25 per share issued
to Outside Directors of the Company. No options were issued to the Chief
Executive Officer or the Named Executive officers during the fiscal year ended
September 30, 1996.
On November 17, 1994, the Board of Directors of the Company approved an
amendment pursuant to which each Outside Director will automatically be granted
an option to purchase 5,000 shares of common stock each calendar year. The
Amendment was approved by the stockholders at the Company's Annual Meeting of
Shareholders on June 5, 1995 and was the basis for the awards of an aggregate of
15,000 options to the Outside Directors in fiscal 1996. On December 19, 1996,
the Board of Directors approved an amendment pursuant to which such annual
grants are made on the first business day of each calendar year.
Pension Plans
The Company has no pension plans.
401(k) Plan
On October 1, 1995, the Company adopted a 401(k) Plan for its employees
and those of its natural gas marketing and exploration and production
subsidiaries. All employees, including the Named Executives, are eligible to
participate.
Employees participating in the Company's 401(k) Plan could authorize the
Company to contribute up to 15% of their gross compensation to the Plan. The
Company matches such voluntary employee contributions up to 3% of employee gross
compensation. Employee's contributions to the Plan cannot exceed thresholds set
by the Secretary of the Treasury. During the fiscal year ended September 30,
1996, the Company and its subsidiaries made matching contributions in the
following amounts: Mr. Castle - $7,125 and Mr. Staedtler - $3,000.
Section 16 Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers, directors and owners of more
than 10% of any class of the Company's securities registered pursuant to Section
12 of the Exchange Act to file reports of ownership and changes in ownership
with the Commission. The Commission's rules also require such persons to furnish
the Company with a copy of all Section 16(a) reports that they file.
Based solely on a review of the copies of the reports which the Company
received and written representations from certain persons, the Company believes
that all such reporting persons complied with such requirements:
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Compensation Committee Interlocks and Insider Participation
Since January 1996, the Compensation Committee consisted of Sidney F.
Wentz, Chairman, Martin R. Hoffmann and William S. Sudhaus. Until January 1996,
when he resigned, Mr. Sudhaus was also an executive officer of the Company and
several of its subsidiaries.
Board Compensation Committee Report on Executive Compensation
Overall Policy. This report is provided by the Compensation Committee to
assist stockholders in understanding the Compensation Committee's objectives and
procedures in establishing the compensation of the Company's Chief Executive
Officer and other executive officers. Sheldon M. Bonovitz and John Sullivan had
served as members of the Compensation Committee until their resignations as
directors on October 5, 1995 and January 5, 1996, respectively. As of September
30, 1996, the Compensation Committee consisted of three directors: Mr. Sidney
Wentz (Chairman), Mr. Martin Hoffmann and Mr. William Sudhaus. Mr. Sudhaus was
previously an executive officer of the Company and several of its subsidiaries
but resigned from such capacities in January 1996. The Compensation Committee's
role is to assure that the compensation strategy of the Company is aligned with
the interests of the stockholders and that the Company's compensation structure
will allow for fair and reasonable base salary levels and the opportunity for
senior executives to earn short-term and long-term compensation that reflects
both Company and individual performance as well as industry practice. The
Company has, from time to time, utilized the expertise of independent
compensation consultants in discharging its responsibilities.
The Company's executive compensation programs are designed to retain and
reward executives who are successful in helping the Company achieve its business
objectives. The key components of the executive compensation program are base
salary, annual incentive awards and equity participation. These components are
administered with the goal of providing total compensation that is competitive
with the median compensation levels in the external marketplace. Median
competitive levels are determined using published survey information and
analyzing similar companies' public data. Similar companies are identified on
the basis of industry, size and growth stage as a comparable peer group. These
companies may differ from year to year and are not necessarily the same peer
group used for purposes of the performance graphs. The program also recognized
meaningful differences in individual performance. Each year the Compensation
Committee reviews the elements of executive compensation to insure that the
total compensation program, and each of its elements, meet the overall
objectives discussed above.
Base Salary. Executive officers' salaries (and salary increases, which are
reviewed annually) are determined on a subjective basis with consideration given
to the level of job responsibility, the competitiveness of the executives'
salaries to the external marketplace and the degree to which the executive's
individual objectives have been achieved. Individual objectives vary by business
unit and strategic business goals. These factors are not considered on any
formula basis.
Annual Bonus Program. Bonus payments are subjectively determined and are
designed to reward and encourage individual excellence. In determining whether
to award a discretionary bonus, the Compensation Committee considers the
individual's special achievements, such as his contribution to actions taken
during the past year that contribute to the strategic growth and competitiveness
of the Company. Bonus payments tend to reflect results of the most recent fiscal
year and thus emphasize achievement of short-term business plans.
Equity Participation. The Compensation Committee believes that it is in
the Company's best interests to grant stock options to executive officers in
order to align the interests of those executive officers with the stockholders
and to maximize long-term stockholder value. The purpose of the Company's 1992
Executive Equity Incentive Plan (the "Incentive Plan"), approved by the
stockholders of the Company in May 1993, is to increase the ownership of Common
Stock of the Company by those key employees who contribute to the continued
growth, development and financial success of the Company and its subsidiaries
and to attract and retain key employees and reward them for the Company's
profitable performance. The Incentive Plan is administered by the Compensation
Committee.
Targeted award ranges are determined by taking into account competitive
marketplace practice. Actual individual awards are subjectively determined based
on those competitive practices and on such factors as the recipient's position,
annual salary and individual and Company performance as well as historical
equity grants and ownership positions. The Compensation Committee believes that
equity participation helps create a long-term partnership between
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management/owners and other stockholders. The policy of granting stock options
on a regular basis and encouraging stock ownership has played a strong part in
retaining an excellent team of executives and managers.
Compensation of the Chief Executive Officer. The Compensation Committee
considers the same factors described above in determining the salary of Mr.
Castle, the Chairman and Chief Executive Officer of the Company. Mr. Castle's
salary earned in fiscal 1996 was $356,250, a decrease of $59,375 from fiscal
1995. This reduction was part of a broad-based reduction in officer salaries
that occurred after, and indirectly because of, the termination of the attempts
to raise financing for the sale of the Company's two refineries to CORE.
Mr. Castle was not awarded any stock options or bonus in fiscal 1996.
Stock option information with respect to executive officers, including Mr.
Castle, is reflected in the tables included in this proxy statement.
Tax Deductibility of Executive Compensation. The Omnibus Budget
Reconciliation Act (OBRA) of 1993 added Section 162(m) to the Internal Revenue
Code. This section eliminates a company's tax deduction for any compensation
over one million dollars paid to any one of the five executives who appear in
the Summary Compensation table included in this proxy statement, subject to
several statutory exceptions. The Company desires to preserve the tax
deductibility of all compensation paid to its executive officers and other
members of management. The Company and its subsidiaries did not pay any of the
three Named Executives over one million dollars in fiscal 1996.
Compensation Committee:
Martin R. Hoffmann
William S. Sudhaus
Sidney F. Wentz (Chairman)
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<PAGE>
Performance Graph
The following performance graph is based upon a peer group of natural gas
marketing and transmission companies whose operations are comparable to the
Company's continuing operations.
The Company is currently engaged in two segments of the petroleum
industry, natural gas marketing and transmission and exploration and production.
The dominant segment is natural gas marketing and transmission which accounted
for approximately 87% of consolidated revenues for the fiscal year ended
September 30, 1996.
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<PAGE>
Performance Graph
Comparison of Five Year-Cumulative Total Returns(1)
Among the Company, the NASDAQ Stock Market
(U.S. Companies Only) and the Company's Natural
Gas Marketing and Transmission Peer Group(2)
Date Company Index Market Index Peer Index
---- ------------- ------------ ----------
09/30/91 100.000 100.000 100.000
10/31/91 73.529 103.306 104.266
11/29/91 64.706 99.838 100.025
12/31/91 57.353 112.035 95.626
01/31/92 63.235 118.585 84.476
02/28/92 67.647 121.272 85.524
03/31/92 47.059 115.549 86.614
04/30/92 47.059 110.593 85.813
05/29/92 64.706 112.030 96.655
06/30/92 70.588 107.650 90.130
07/31/92 67.647 111.463 107.075
08/31/92 57.353 108.056 111.066
09/30/92 70.588 112.073 112.927
10/30/92 64.706 116.487 107.620
11/30/92 61.765 125.755 100.418
12/31/92 97.059 130.384 99.026
01/29/93 126.471 134.096 101.805
02/26/93 129.412 129.093 116.132
03/31/93 167.647 132.829 127.037
04/30/93 138.235 127.160 121.771
05/28/93 176.471 134.756 130.917
06/30/93 170.588 135.379 143.471
07/30/93 158.823 135.539 142.656
08/31/93 217.647 142.545 155.198
09/30/93 182.353 146.790 150.363
10/29/93 270.588 150.089 139.037
11/30/93 208.823 145.613 124.558
12/31/93 150.000 149.672 133.556
01/31/94 120.588 154.216 140.771
02/28/94 100.000 152.774 127.322
03/31/94 122.059 143.377 118.594
04/29/94 129.412 141.517 118.307
05/31/94 147.059 141.862 115.833
06/30/94 170.588 136.675 114.725
07/29/94 148.529 139.477 113.793
08/31/94 208.823 148.369 121.275
09/30/94 188.235 147.990 120.040
10/31/94 176.471 150.898 118.789
11/30/94 150.000 145.893 110.308
12/30/94 135.294 146.303 108.343
01/31/95 138.235 147.123 108.950
02/28/95 117.647 154.904 114.521
03/31/95 95.588 159.493 114.332
04/28/95 100.000 164.515 118.963
05/31/95 103.676 168.757 122.046
06/30/95 122.059 182.433 121.669
07/31/95 113.235 195.842 122.082
08/31/95 102.941 199.811 124.617
09/29/95 111.765 204.406 130.786
10/31/95 83.824 203.235 123.010
11/30/95 95.588 208.007 133.091
12/29/95 104.963 206.904 135.714
01/31/96 91.176 207.925 137.326
02/29/96 92.647 215.849 138.930
03/29/96 108.824 216.567 149.107
04/30/96 141.176 234.530 159.512
05/31/96 126.471 245.307 162.045
06/28/96 120.588 234.211 163.880
07/31/96 120.588 213.306 160.801
08/30/96 109.559 225.298 172.528
09/30/96 101.471 242.421 179.278
- -------------
(1) Assumes $100 invested on September 30, 1991 in the Company's Common Stock,
the Nasdaq Stock Market (Market Index for U.S. Companies only) and the
Peer Group (as hereinafter defined).
(2) The Peer Group selected by the Company is comprised of the following
companies, all of which are involved in natural gas marketing and
transmission: Mitchell Energy & Development Corp., Noram Energy Corp.,
Texas Gas Corp. Development., Western Gas Resources Inc., NGC Corp.,
Panhandle Eastern Corp. and Texas Power Corp.
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<PAGE>
BOARD OF DIRECTORS AND BOARD COMMITTEES
Fiscal 1996 Board Meetings
The Board of Directors of the Company held seven meetings during the
fiscal year ended September 30, 1996. During such fiscal year, each of the
incumbent Directors attended not less than 75% of the total number of meetings
of the Board of Directors and of the Committees of the Board of Directors on
which such Director served.
Board Committees
The Audit Committee consisted of Mr. Hoffmann (Chairman), Mr. Wentz and
Mr. Sudhaus. The functions of the Audit Committee are to: (a) recommend the
appointment of the Company's independent public accountants; (b) review the
financial reports of the Company; (c) monitor the effectiveness of the
independent audit; (d) assure that the scope and implementation of the
independent audit is not restricted or the independence of the independent
accountants compromised; (e) review the independent accountants' reports to
management on internal controls and recommend such actions as may be
appropriate; and (f) review and approve the engagement by management of all
non-audit and special services involving in the aggregate, fees to the Company's
independent accountants in excess of $15,000 per year. The Audit Committee held
one meeting during the fiscal year ended September 30, 1996.
The Company has not established a nominating committee.
The Compensation Committee consisted of Mr. Wentz (Chairman), Mr. Hoffmann
and Mr. Sudhaus. All three are outside directors. The Compensation Committee
establishes overall compensation programs and policies for the Company. The
Compensation Committee monitors the selection and performance, as well as
reviews and approves the compensation, of key executives, and administers the
Incentive Plan. The Compensation Committee held three meetings during the fiscal
year ended September 30, 1996.
Compensation of Directors
All of the Outside Directors are paid director's fees of $25,000 per year.
In addition, all Directors received fees for attending meetings of the Board of
Directors. The fee per meeting is $1,500. Committee members also received a $500
fee for attending each committee meeting.
In addition, each Outside Director is granted an option to purchase 5,000
shares of Common Stock each calendar year. The option is granted on the first
business day of each year. The exercise price for such options is the closing
price of the Company's stock on the date of grant. Previously, the option grant
date was the earlier to occur of a) the first trading day coinciding with or
immediately following the fifteenth day after the Company's regular Annual
Meeting of Stockholders or (b) the first trading day in May. The Company issued
to each of Messrs. Hoffmann, Wentz and Sudhaus options to purchase 5,000 shares
of Common Stock at $11.25 per share in fiscal 1996.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Legal Fees
Mr. Craig Culbertson, a former officer of the Company and several of
its subsidiaries, is also a partner in a law firm. The law firm served as
general counsel to the Company until May 1995 and has remained as special
counsel thereafter. Subsequent to September 30, 1995, Mr. Culbertson resigned
from all positions he held in the Company and its subsidiaries. During the year
ended September 30, 1996, the Company and its subsidiaries incurred legal fees
to the law firm.
Management Fees
On March 31, 1993, the Company entered into an agreement to sell to
Terrapin its oil and gas partnership management businesses for $1,100,000
($800,000 note bearing interest at 8% per annum and $300,000 cash) which
approximated the book value of its partnership interests. The closing of the
stock purchase transaction occurred on June 30, 1993. Terrapin is wholly-owned
by Richard Staedtler. Mr. Staedtler was an executive officer of the Company from
September 1983 until June 1993. The $800,000 note was repaid in December 1994.
In November 1994, he rejoined the Company as its Chief Financial Officer.
In conjunction with the sale of its partnership management business,
the Company and one of its subsidiaries entered into two management agreements
with Terrapin to manage its exploration and production operations. In May 1996,
the second management agreement was expanded to include corporate accounting
functions. Management fees incurred to Terrapin for the year ended September 30,
1996 aggregated $613,000.
EXERCISE/DISCHARGE OF SARs
In November 1992, the Company granted William Sudhaus, an executive
officer, 112,500 SARs in exchange for his partnership interests in IRLP. The
exercise price was $6.00. In June 1993, the Company granted Mr. Sudhaus an
additional 150,000 SARs in exchange for the remaining partnership interests in
IRLP owned by Mr. Sudhaus. The exercise price was $12.50. In November 1994, Mr.
Sudhaus received $1,026,035 upon exercising the first 112,500 SARs. In January
1996, Mr. Sudhaus exchanged the remaining 150,000 SARs for $500,000. Mr. Sudhaus
is currently a Director of the Company and is a former executive officer of the
Company and several of its subsidiaries.
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<PAGE>
PROPOSAL TO ELECT DIRECTOR
At the Annual Meeting, each Stockholder will be asked to elect one
Director, constituting one class of directors, to serve for the term indicated
and until such Director's successor is elected and qualified. In the
unanticipated event that the nominee for Director becomes unavailable it is
intended that the proxies will be voted for such substitute nominee as may be
designated by the Board of Directors.
The Company's Bylaws, as amended, provide that the number of Directors
of the Company shall be not less than four, nor more than nine, as shall be
determined by the Board of Directors. Both the Bylaws and the Company's
Certificate of Incorporation also provide that the Directors shall be divided
into three classes, each class to consist, as nearly as possible, of one third
of the number of Directors to constitute the entire Board. At each annual
meeting of Stockholders of the Company, successors to the class of Directors
whose term expires at such meeting shall then be elected for a three-year term.
The Bylaws further provide that if the number of Directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of Directors in each class as nearly equal as possible.
The shares represented by the enclosed Proxy will be voted as directed.
If no choice is specified in the Proxy, the shares represented by the enclosed
Proxy will be voted "For" the nominee set forth below. The Board of Directors
recommends voting "FOR" the nominee to serve in the class indicated.
Information concerning the nominee for the class of Directors to be
elected, as well as those continuing Directors not standing for election at the
Annual Meeting, is set forth below:
The following individual is nominated to serve as Director in the class
whose term will expire at the Annual Meeting in the year 2000.
John P. Keller is the nominee for director whose term will expire at
the 2000 Annual Meeting. Since 1972, Mr. Keller has served as the President of
Keller Group, Inc., a privately-held corporation with subsidiaries in Ohio,
Pennsylvania and Virginia. In 1993 and 1994 Mr. Keller also served as the
Chairman of American Appraisal Associates, an appraisal company. Mr. Keller is
also a director of A.M. Castle & Co. and Old Kent Financial Corporation.
The following individuals are Directors whose term will expire at the
1998 Annual Meeting:
Joseph L. Castle II has been a Director of the Company since 1985. Mr.
Castle is the Chairman of the Board of Directors and Chief Executive Officer of
the Company, having served as Chairman from December 1985 through May 1992 and
since December 20, 1993. Mr. Castle also served as President of the Company from
December 1985 through December 20, 1993 when he reassumed his position as
Chairman of the Board. Mr. Castle has worked in the energy industry in various
capacities since 1971. Mr. Castle is a director of Comcast Corporation and Mark
Centers Trust, a real estate investment trust and Chairman of the Board of
Charming Shoppes, Inc.
Sidney F. Wentz has been Chairman of the Board of The Robert Wood
Johnson Foundation, the nation's largest health care philanthropy, since June
1989. Commencing in 1967, he held several positions with Crum and Forster, an
insurance holding company, retiring as Chairman and Chief Executive Officer in
1988. Previously, he was an attorney with the law firm of White & Case and then
Corporate Attorney for Western Electric Company/AT&T. Mr. Wentz is a director of
Ace Limited, a Bermuda-based insurance company, and a trustee for Morristown
Memorial Hospital and Drew University.
The following individual is a Director whose term will expire at the
1999 Annual Meeting.
Martin R. Hoffmann is of counsel to the Washington, D.C. office of the
law firm of Skadden, Arps, Slate, Meagher & Flom LLP. He has been a Senior
Visiting Fellow at the Center for Technology, Policy and Industrial Development
of the Massachusetts Institute of Technology since 1993 and a private business
consultant since 1993. From 1989 to 1993, Mr. Hoffmann served as Vice President
and General Counsel of Digital Equipment Corporation. Prior to assuming this
position, Mr. Hoffmann practiced law as Managing Partner of the Washington, D.C.
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<PAGE>
office of Gardner, Carton and Douglas from 1977 to 1989. Mr. Hoffmann also
served in various capacities at the United States Department of Defense,
including General Counsel from 1974 to 1975 and Secretary of the Army from 1975
to 1977. He is a Director of Sea Change Technology, Inc. of Maynard,
Massachusetts and Mitretek Systems of McLean, Virginia.
PROPOSAL TO APPOINT INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the accounting firm of KPMG Peat
Marwick LLP to be the Company's independent accountants to audit the books and
records of the Company and its subsidiaries for the fiscal year ending September
30, 1997. The firm has no material relationship with the Company and is
considered well qualified. Should the Stockholders of the Company not ratify the
selection of KPMG Peat Marwick LLP, the selection of another firm of independent
certified public accountants will be undertaken by the Board of Directors.
The Company's independent accountants for the fiscal year ended
September 30, 1996 were the firm of Price Waterhouse LLP ("Price Waterhouse").
Price Waterhouse resigned as the Company's independent accountants on February
11, 1997. The reports of Price Waterhouse on the financial statements for the
past two fiscal years contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or accounting
principle. In connection with its audits for the two most recent fiscal years
and through February 11, 1997, there have been no disagreements with Price
Waterhouse on any matter of accounting practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of Price Waterhouse would have caused them to make reference
thereto in their reports on the financial statements for such years. Price
Waterhouse has furnished the Company with a letter stating that it agrees with
the above statements in this paragraph.
Representatives of Price Waterhouse are expected to be present at the
Annual Meeting, and will have an opportunity to make a statement if he or she
desires to do so and is expected to be available to respond to appropriate
questions.
The shares represented by the enclosed Proxy will be voted as directed.
If no choice is specified in the Proxy, the shares represented by the enclosed
Proxy will be voted "FOR" the selection of KPMG Peat Marwick LLP as the
Company's independent accountants. The Board of Directors recommends a vote
"FOR" the proposal to ratify the selection of KPMG Peat Marwick LLP as the
Company's independent accountants.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before
the Annual Meeting. Should any other matter be properly raised at the Annual
Meeting, however, it is the intention of each of the persons named in the Proxy
to vote in accordance with his judgment as to each such matter raised.
VOTE REQUIRED
The nominee within the class of Directors for election to the Board of
Directors of the Annual Meeting who receives the greatest number of votes for
Director, a quorum being present, shall become the Director for such class.
Abstentions and broker non-votes will not be tabulated as negative votes with
respect to any matter presented at the Annual Meeting, but will be included in
computing the number of shares of Common Stock present for purposes of
determining the presence of a quorum for the Annual Meeting.
STOCKHOLDER PROPOSALS
Any proposals of Stockholders which are intended to be presented at the
1998 Annual Meeting of Stockholders must be received by the Secretary of the
Company by November 15, 1997 for consideration for inclusion in the Proxy
Statement.
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<PAGE>
EXPENSES OF SOLICITATION
The cost of solicitation of Proxies will be borne by the Company.
Solicitation will be made initially by mail. The Directors and officers and
other employees of the Company may, without compensation other than their usual
compensation, solicit Proxies by mail, telephone, telegraph or personal
interview. The Company will also reimburse brokerage firms, banks, voting
trustees, nominees and other recordholders for their reasonable out-of-pocket
expenses in forwarding proxy materials to the beneficial owners of Common Stock.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ JOSEPH L. CASTLE II
------------------------------------
JOSEPH L. CASTLE II
Chairman and Chief Executive Officer
Radnor, Pennsylvania
March 12, 1997
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<PAGE>
CASTLE ENERGY CORPORATION
ANNUAL MEETING OF STOCKHOLDERS - APRIL 23, 1997
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned Stockholder of Castle Energy Corporation, a Delaware
corporation (the "Company"), hereby appoints Joseph L. Castle II and Richard E.
Staedtler, and each of them, attorneys and proxies, with full power of
substitution , to vote at the Annual Meeting of the Stockholders of Castle
Energy Corporation to be held on Wednesday, April 23, 1997 at 9:30 a.m., Eastern
Daylight Time, at Doubletree Guest Suites, 640 West Germantown Pike, Plymouth
Meeting, Pennsylvania, and at any adjournment or postponement thereof, in the
name of the undersigned and with the same force and effect as if the undersigned
were present and voting such shares, on the following matters and in the
following manner.
1. ELECTION OF DIRECTOR TO SERVE UNTIL THE 2000 MEETING FOR the nominee
listed below
--------------------------
WITHHOLD AUTHORITY to vote for the nominee listed below
--------------------------
John P. Keller
2. PROPOSAL TO APPOINT KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1997.
[ ] For [ ] Against [ ] Abstain
3. In their discretion, the Proxies are authorized to vote on such other
business as may properly come before the Annual Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE DEEMED TO
CONSTITUTE DIRECTION TO VOTE "FOR" THE ABOVE NOMINEE AND PROPOSAL.
Dated ____________________________________, 1997
________________________________________________
Signature
________________________________________________
Name Spelled Out
________________________________________________
Signature, if held jointly
________________________________________________
Name Spelled Out
Please sign exactly as your name(s) appear hereon.
When signing as attorney, administrator, trustee,
guardian or any other representative, please so
indicate.
